Transcript Ministers Briefing - Budget Office of the Federation

THE 2007 FEDERAL BUDGET
Executive Summary
Honourable Minister of Finance’s Briefing
On 8 January 2007
At International Conference Centre, Abuja
© 2007 BOF
1
OUTLINE

2007 Federal Budget



Key Assumptions and Targets
What the 2007 Budget is about
Revenue Forecasts





Oil revenue
Non-oil income
Federation Account
Federal Government Share
FGN Expenditure




Summary of FY07 Budget
Deficit & Financing
Controlling FGN Spending
Expenditure



Transfers
Debt Service
MDA Spending
© 2007 BOF
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OUTLINE

2007 Federal Budget

Key Sectors










Education
Health
Works
Power
Water
Security
Agriculture
Millennium Development Goals
Additional Infrastructure Expenditure
Economic Impact
© 2007 BOF
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KEY ASSUMPTIONS & TARGETS
KEY ASSUMPTIONS & TARGETS
Production capacity (in mbpd)
Production quota (in mbpd)
Production (in mbpd)
2005
2.50
2.29
2.51
2006
2.59
2.35
2.00
2007
2.90
2.40
2.50
51.10
30.00
60.40
35.00
55.00
40.00
JV cash calls (FGN share) in US$ bns
Technical cost of oil companies
Operating expenses (T1) - in USD
Capital expenses (T2) - in USD
4.00
4.20
4.50
2.41
5.37
2.12
5.82
2.94
5.48
Weighted average rate of PPT
Weighted average rate of Royalties
83%
19%
81%
18%
81%
18%
133
129
127.1
5%
30%
28%
5%
30%
17%
5%
30%
17%
11.6%
13.0%
6.2%
10.9%
13.0%
6.9%
9.0%
9.0%
10.0%
Projected price - Market (in USD)
Projected price - Budget (in USD)
Average exchange rate (NGN/USD)
VAT rate
CIT rate
Weighted average duty rate
Target inflation
Target interest rate (weighted average)
Target growth in real GDP
© 2007 BOF
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WHAT THE 2007 BUDGET IS ABOUT

Delivering economic growth and wealth creation



Reducing Poverty and achieving of MDGs




Developing physical infrastructure
Enhancing human capital
Improving social indicators
Reducing incidence of poverty
Social safety nets
Ensuring macroeconomic stability
© 2007 BOF
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OIL REVENUE
OIL REVENUE AT PROJECTED BUDGET PRICE (=N=bns)
100%
90%
80%
70%
60%
50%
40%
30%
20%
10%
0%
432
474
532
716
984
1,147
1,120
1,346
1,554
2005
2006
2007
Crude Oil Sales
PPT
© 2007 BOF
Royalties & other
6
NON-OIL TAXES
NON-OIL TAXES (=N=bns)
100%
90%
80%
70%
60%
50%
40%
30%
20%
10%
0%
197
230
230
299
190
225
265
2005
2006
2007
233
162
VAT
CIT
© 2007 BOF
Customs
7
FEDERATION ACCOUNT - INFLOWS
INFLOWS INTO THE FEDERATION ACCOUNT
Crude Oil Sales
Oil taxes & Other
Value Added Tax
Companies' Income Tax
Customs & Excise Duties
TOTAL CURRENT YEAR
Distributions from Excess Crude Account
TOTAL CURRENT YEAR
Growth
© 2007 BOF
2005
=N= bns
1,120
1,148
190
162
233
2,853
380
3,233
2006
=N= bns
1,300
1,260
230
232
178
3,199
569
3,768
14.2%
2007
=N= bns
1,554
1,679
265
299
230
4,027
4,027
6.4%
8
FEDERATION ACCOUNT - OUTFLOW
OUTFLOWS FROM THE
FEDERATION ACCOUNT
To Derivation
To FGN
To States
To Local Governments
TOTAL
Growth
© 2007 BOF
2005
2006
2007
=N= bns
295
1,476
839
623
3,233
=N= bns
333
1,723
983
729
3,768
14.2%
=N= bns
420
1,800
1,039
768
4,027
6.4%
9
CRUDE OIL PRICES
CRUDE OIL PRICE
70
60
50
40
30
20
10
2003
2004
2005
Actual price
2006e
2007f
Benchmark for budgeting
© 2007 BOF
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FEDERATION ACCOUNT - EXCESS CRUDE
ESTIMATES OF EXCESS CRUDE REVENUE
3,000
Billions of Naira
2,500
2,000
1,500
1,000
500
2005
2006
Excess crude
© 2007 BOF
2007
Federal budget share
11
FGN REVENUE - TOTAL
FGN REVENUE (=N=bns)
34
34
17
57
Federal budget
FCT
Derivation & Ecology
Stabilization
1,642
© 2007 BOF
Development of Natural
Resources
12
FGN REVENUE - BUDGET SHARE
2007 FGN REVENUE - BUDGET SHARE (=N=bns)
104
86
139
Oil revenue
Value Added Tax
Companies' Income Tax
Customs & Excise Duties
Indpenedent revenue
71
1,364
© 2007 BOF
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SUMMARY OF FY07 BUDGET
REVENUE
EXPENDITURE HEAD
Statutory transfers
Debt service
MDA spending
TOTAL
DEFICIT
GDP
DEFICIT/GDP
© 2007 BOF
2006
Actual
=N= bns
1,475
2007
Budget
=N= bns
1,729
92
240
1,444
1,776
102
326
1,880
2,308
(301)
14,905
-2.0%
(579)
17,338
-3.3%
14
DEFICIT FINANCING

Deficit of =N=579bn to be financed from
the following principal sources:


Sale of Government Properties (=N=125bn)
Domestic Borrowing


Bond Markets (=N=200bn)
Statutory Funds (=N=100bn)
© 2007 BOF
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CONTROLLING FGN SPENDING
© 2007 BOF
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STATUTORY TRANSFERS
STATUTORY TRANSFERS (=N=bns)
National Judicial Council
35
43
Niger-Delta
Development
Commission
Universal Basic
Education Scheme
24
© 2007 BOF
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DEBT SERVICE
DEBT SERVICE (=N=bns)
100%
90%
80%
70%
60%
50%
40%
30%
20%
10%
0%
70
61
220
265
2006
2007
181
180
2005
Domestic debts
© 2007 BOF
Foreign debts
18
DEBT SERVICE

Foreign Debt


Reduction from =N=181bn in 2005 to =N=61bn in 2007
Reduction in foreign debt stock



Exit from Paris Club - 2005/6
Exit from London Club - 2006/7
Domestic Debt


Increase from =N=180bn in 2005 to =N=265bn in 2007
Increase in domestic debt stock




Borrowing to fund 2007 Budget (=N=200bn)
Pensioner bonds (=N=75bn)
Contractor bonds (=N=150bn)
Liquidity management
© 2007 BOF
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BREAKDOWN OF MDA SPENDING
Public Service
Reforms
2%
Payroll
35%
Capital
44%
Petroleum Support
Fund
4%
© 2007 BOF
Overheads
15%
20
MDA EXPENDITURE
Petroleum Support
Fund
4%
Pension PAYG
4%
Works
12%
Security
12%
Other
33%
Education
10%
FCT
4%
Power
6%
Water
Health 6%
7%
Public Service Reform
2%
© 2007 BOF
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EDUCATION

Key Initiatives:




Training for 15,000 Science/Technical Teachers (=N=1bn)
Federal Government Scholarship (=N=350mn)
Construction of Classrooms for Nomadic Education Programme
(=N=350mn)
Monitoring of Education Quality (=N=2bn)
Key Reforms:



Institutional re-structuring and capacity building
Improving quality of and access to education
Increase investment component of spending in education
Attract additional resources to fund education sector
© 2007 BOF
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HEALTH

Key Initiatives:





Refurbishing all tertiary healthcare institutions including
VAMED teaching hospitals (=N=17.5bn)
National AIDS/STI control programme (=N=2.2bn)
Rollback Malaria Programme (=N=600mn)
National Programme on Immunisation (=N=1.2bn)
Training of 5,000 health workers on integrated child
healthcare (=N=610mn)
Further strengthening of National Health Insurance
Scheme
© 2007 BOF
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
Key Outputs:
AIDS/HIV





HEALTH
Anti-retrovirals for 100,000 people
Test kits and consumables for 5,000,000 people
31 million doses of anti-malarials for children
25 million doses of river-blindness drugs
Completion of 8 VAMED hospitals








Jos
Ilorin
Kano
Nnewi
Ile-Ife
Sokoto
Calabar
Benin
© 2007 BOF
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WORKS

Key Initiatives:










East-West Road (=N=32.3bn)
Kano-Maiduguri Road (=N=20bn)
Abuja-Lakoja Road (=N=2.9bn)
Ibadan-Ilorin (=N=8.6bn)
Kaduna Eastern Bypass (=N=2.3bn)
Bodo-Bonny Road with bridge at Opodo (=N=1.8bn)
Onitsha-Owerri Dualisation (=N=4.2bn)
Onitsha-Enugu Road (=N=4.7bn)
Benin-Shagamu (=N=3.5bn)
Otta-Abeokuta (=N=5.7bn)
Federal Emergency Road Maintenance Agency (=N=17bn)
© 2007 BOF
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WORKS

Key Outputs:



Complete 40 roads (2,828km) over 50% completion
Continue 58 roads (1,817km) under 50% completion
(completed by 2009)
9 major road programmes to develop key national
transport links
2 bridges using PPP model


2nd Niger Bridge
Bridge over River Benue at Bagana
© 2007 BOF
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POWER

Key Initiatives: Implementation of Rural Electrification projects
(=N=24bn)
 Generation projects in 2007 to compliment Integrated
Power Projects







Egbin (=N=6.2bn)
Alaoji (=N=13.1bn)
Omotosho (=N=1.7bn)
Mambila (=N=1.5bn)
Papalanto (=N=2.3bn)
Distribution of meters nationwide (=N=7bn)
Completion of transmission line (=N=30bn)
© 2007 BOF
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POWER

Key Outputs:


Completion - highest priority of 1,667 outstanding rural
electrification projects - increase coverage by 10%
Completion of 32 ongoing transmission projects
Distribution projects to remove bottleneck in supply
© 2007 BOF
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WATER

Key Initiatives:










Gurara Dam and Water Transfer Project (=N=16.5bn)
Abeokuta Water Supply (=N=1bn)
Owiwi Dam (=N=1.5bn)
Middle Rima Irrigation (=N=1.7bn)
Shagari Dam (=N=700mn)
Kano River Irrigation (=N=2.1bn)
Ile-Ife Dam (=N=757mn)
Jada Multipurpose Dam (=N=840mn)
Galma Multipurpose Dam (=N=2.6bn)
Owena Multipurpose Dam (=N=5bn)
Key Outputs:

70,000 additional hectares under irrigation
Access to clean water to additional 8 million Nigerians
© 2007 BOF
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SECURITY

Police






Arms, Ammunition and Riot Control Equipment
(=N=590mn)
Operational Vehicles (=N=1bn)
Communication Systems (=N=1.2bn)
Bullet Proof Vests (=N=1.8bn)
Barracks & Office Rehabilitation (for 6,000 officers)
(=N=2.6bn)
Defence


Arms and Ammunition (=N=720mn)
Barracks rehabilitation (=N=2.2bn)
© 2007 BOF
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AGRICULTURE

Key Initiatives:




Buyer of last resort (=N=500mn)
Agricultural credits inc. fertilizer subsidies (=N=1.5bn)
Procurement of tractors (=N=456mn)
Support for Grazing Reserves and Stock (=N=1.3bn)
Rehabilitation of rural roads (=N=8bn)
© 2007 BOF
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AGRICULTURE

Key Outputs:


90,000 tons of assorted fertilizer to 36 states and FCT
56 tractors and equipment
Buyer of Last Resort



5,000 tons of Grain
750 tons of Yam and Cassava
Rural Roads


500km rehabilitated in South-South
1,200km rehabilitated nationwide
© 2007 BOF
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MILLENNIUM DEVELOPMENT GOALS
MILLENNIUM DEVELOPMENT GOALS (=N=bns)
10
2 1
15
20
21
2
3
15
10
14
© 2007 BOF
Education
Health
Power
Water
Agriculture
Housing
FCT
Conditional Grants
Social Safety Nets
Monitoring&Evaluation
National Action Committee on Aids
33
MILLENNIUM DEVELOPMENT GOALS

=N=110bn included within 2007 Budget

Education (=N=15.4bn)






In-service training for 145,000 teachers
Retraining 40,000 teachers
Training additional 5,000 teachers in science
Girls Education Programme
In-service training for 145,000 teachers
Health (=N=20.6bn)


Constructing and equipping 110 model primary health centres
Vaccination



250 million doses - basic vaccines
37 million doses - bundled vaccines
3,000 doses of TB drugs
© 2007 BOF
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MILLENNIUM DEVELOPMENT GOALS

=N=110bn included within 2007 Budget

Agriculture (=N=15bn)





Rehabilitation of 102 grazing reserves
12,500 metal storage bins; 6,250 brick grain stores; 2,500 fish
kilns
Water Harvesting technologies in 5 states
Conditional Grants to States and FCT (=N=20bn)
Social Safety Nets (=N=10bn)
© 2007 BOF
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ADDITIONAL INFRASTRUCTURE
EXPENDITURE

Power





Railway




Generation
Gas for power plants
Transmission lines
Distribution lines
Construction
Consultancy
Project management
Gas



OK LNG
Pipeline for OK LNG
Brass LNG
© 2007 BOF
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ADDITIONAL INFRASTRUCTURE
EXPENDITURE
SPENDING PROPOSED
POWER
RAILWAY
GAS
OK Pipeline
Brass LNG
Gas Supply to IPP
© 2007 BOF
2007
Total
FGN Share
=N=bn
=N=bn
280
128
81
37
147
531
116
67
244
53
37
EXPECTED OUTPUTS

Power

Generation




Transmission



NIPP - 2,743MW (68% increase on current capacity)
Conversion of existing plants - 1,882MW (further 28% increase)
Mambilla - 2,600MW
11,898km of transmission wires
48% increase in total transmission network
Distribution


79,005km of distribution wires
22% increase in total distribution network
© 2007 BOF
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EXPECTED OUTPUTS

Railway





Double track, standard gauge rail-line Lagos-Ibadan-Ilorin-Minna-Kano
with link Minna-Abuja-Kaduna
Average speed - 150km/h
Route length ~ 1,315km
Total length of track ~ 2,325km
Completion by 2011
SEGMENT
Lagos (Apapa) - Ibadan
Ibadan - Ilorin
Ilorin - Minna
Minna - Kano
Minna - Abuja - Kaduna
LENGTH (km)
180
200
270
360
305
© 2007 BOF
TRACK
Double
Double
Double
Double
Single
39
EXPECTED OUTPUTS

Gas

OK LNG




OK Pipeline


Capacity - 4 trains (in total delivering equivalent to 1.0 mbpd)
Timeframe - First 2 trains deliver end 2010, trains 3/4 in 2012
Internal Rate of Return - 15%
Internal Rate of Return - 12-15%
Brass LNG


Capacity - 2 trains (in total delivering equivalent to 0.39 mbpd)
Timeframe - Both trains on-stream 2011
© 2007 BOF
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GDP GROWTH
GDP GROWTH RATE (%)
12%
10%
8%
6%
4%
2%
0%
2004
2005
2006e
2007f
Growth rate
© 2007 BOF
41
GOVERNMENT DEBT
DEBT/GDP RATIO (%)
60%
50%
40%
30%
20%
10%
0%
2004
2005
2006e
2007f
Debt/GDP ratio
© 2007 BOF
42
INFLATION
INFLATION RATE (%, END PERIOD)
14.0%
12.0%
10.0%
8.0%
6.0%
4.0%
2.0%
0.0%
2004
2005
2006
2007
Inflation Rate
© 2007 BOF
43
INTEREST RATE
INTEREST RATES
16%
14%
12%
10%
8%
6%
4%
2%
0%
2004
2005
2006e
Savings rate
© 2007 BOF
2007f
90 day FGN bills
44
EXCHANGE RATE
EXCHANGE RATE (END PERIOD)
136
(NGN/USD)
134
132
130
128
126
124
122
2004
2005
2006e
2007f
Exchange Rate (NGN/USD)
© 2007 BOF
45
PRESENTATION AVAILABLE AT:
WWW.BUDGETOFFICE.GOV.NG
© 2007 BOF
46