The overall fiscal deficit for the Federal Government in 1999 is projected at
N34.1 billion, representing 1.05 percent of projected GDP. This deficit is arrived at
after taking into consideration anticipated transfers, including draw-down from our
external reserves. This year, the projected deficit has been estimated to avoid creating
accounting distortions.
STATES AND LOCAL GOVERNMENT FINANCES
In 1999, the Federation Account Revenue is estimated at N262.4 billion. The
existing allocation formula will be maintained. Therefore, the Federal Government will
receive N127.2 billion; States N63 billion; Local Government Councils N52.5 billion;
Federal Capital Territory (FCT) N2.6 billion and Special Funds N17.1 billion.
In 1999, the estimated VAT amount is N50 billion. The projected increase
derives from the fact that the base of VAT will be increased by the expansion of VATable
items through reduction of the exemption list. New VAT offices will also be opened in the
states to enhance collections. In line with the new VAT distribution formula introduced in
this budget the actual allocation to the Federal Government will be reduced to N7.5
billion while that of the States and Local Governments will accordingly be increased for
them to receive N25.0 billion and N17.5 billion respectively.
FISCAL POLICY
Fiscal policy in the last five years has been designed not only to increase
revenue but also as an instrument to promote general economic development. This strategy
will be reinforced and fine-tuned in 1999 to sharpen the policy instruments and enhance
their value towards the attainment of set goals and objectives.
In view of the revenue shortfall, all tiers of government must exercise greater
budgetary discipline and concentrate their efforts at enhancing internally generated
revenue.
REVIEW OF THE CUSTOMS AND EXCISE TARIFF
Since the last tariff adjustment, many manufacturers have made representations
on the adverse effects of some of the tariff measures and requested for further
adjustments. Consequently, government has approved some adjustments to the customs and
excise tariff. Government has also approved the restoration of excise duty on some items
such as spirits, cigarettes, tobacco and their derivatives. In addition, a review of the
import and export prohibition policies will be undertaken.
In the same vein, with effect from January 1, 1999, Government hereby abolishes
the 25 percent import duty rebate introduced in August 1995 because after three and a half
years of application, it can hardly be justified. Similarly, requests for non-statutory
exemption from the payment of import duty will no longer be entertained.
Government appreciates that a number of industries are under considerable
pressure from cheap imports which, it is suspected, are being dumped in Nigeria. The
Ministry of Finance will meet with concerned interest groups at the beginning of the year
to discuss ways of addressing this issue. Meanwhile, an anti-dumping committee will be set
up soon in the Ministry of Commerce and Tourism. This Committee is to handle cases and
complaints relating to dumping, issues of subsidies and countervailing measures to protect
Nigeria against unfair trade practices.
EXPORT PROMOTION AND INCENTIVE SCHEMES
Government will continue to implement and streamline existing export incentive
schemes and render them more effective. The various schemes and funds are being merged
into a new Manufacture-in-Bond Scheme under which payment of cash incentives to exporters
would be replaced with the introduction of Negotiable Duty Credit Certificates (NDC's). In
addition to the above incentives, government hereby abolishes the prohibition list in
order to encourage competitive pricing and to increase the income of the farmer.
ECOWAS TRADE LIBERALIZATION
Nigerian enterprises will be encouraged in 1999 to take full advantage of the
protocol on ECOWAS Trade Liberalization Scheme (TLS) which provides for the elimination of
trade barriers including taxes and levies. adequate arrangements will be made to ensure
that the implementation of the scheme will not adversely affect our manufactured products.
PORT REFORMS
Government in 1996 introduced some reforms at the ports. These included the
expansion of mandatory pre-shipment inspection to cover all imports destined for Nigeria
irrespective of value and the source of funding. In addition, the reforms provided for the
involvement of Professional Import Duty Administrators (PIDA) in the cargo clearance
process. The services of these Administrators, however, will cease with effect from June
30th. 1999.
Problems have arisen in relating to the proliferation of too many agencies in
the ports, which has constituted another bureaucratic bottleneck. Accordingly, only the
following agencies will henceforth be retained at the ports under the overall supervision
of the Nigerian Ports Authority:
- Nigeria Customs Service;
- The Ports Police;
- Nigeria Immigration Service; and
- Authorized Agents.
Where the attention of a specialized agency such as SSS, NDLEA, or Plant
Quarantine is required, they would be called from their offices within the Ports. These
measures are required to make our ports more attractive to importers and instill sanity.
Furthermore, facilities at the ports will be upgraded and modernized through the provision
of new equipment and software.
Similarly, at the airports only the Customs and Immigration will be retained,
under the general supervision of the Federal Aviation Authority of Nigeria (FAAN).
Accordingly, security at our airports will be provided by FAAN
PRE-SHIPMENT INSPECTION
Government has approved the replacement of pre-shipment inspection with
destination inspection with effect from April 1, 1999. It has also approved that the
services of pre-shipment export agents will cease with effect from April 1, 1999.
TAX POLICY
The tax policy measures in 1998 will continue in 1999. Given the current trends
in global oil prices, measures that will ensure efficient tax administration in the
country are essential in order to raise higher revenues from the non-oil tax resources. In
1999, efforts of Government will be geared towards widening the VAT base through gradual
phasing out of VAT exemptions and intensifying collection of all due taxes. Government
will at the same time strengthen the tax authorities to be more effective in the
collection of taxes from both individual and corporate taxpayers.
a. Review of VAT Sharing Ratio.
For State Governments to prosecute basic projects having greater impact on the
lives of people at the grass roots, the present VAT sharing formula is to be adjusted in
favour of the States and Local Governments.
b. Incentives to the Oil and Gas Industry
The approved tax incentives in 1997 and 1998 for the exploitation and
utilization of associated gas are to continue in 1999. Most of the earlier incentives have
been promulgated into laws. In 1999, all the incentives approved by government will be
signed into laws to facilitate a stable tax regime in the country for investors.
c. Production Sharing Contract (PSC)
From 1999, all oil operators who singed the PSC Agreements for deep offshore
oil exploration production with the Government in 1993 are to claim Investment Tax Credit
(ITC) allowance as tax offset in accordance with the various agreements, until the
contracts terminate. The NNPC is to compile a list of such companies for the Federal
Inland Revenue Service to implement. However, such concession will not be extended to new
contracts
In addition, interest incurred on inter-company loans obtained under terms
prevailing in the open market are to qualify as allowable deduction in arriving at taxable
petroleum profits.
a. Tax Treaties
To consolidate the extensive tax incentives to foreign investors, Government
will continue with the policy of concluding Double Taxation agreements (DTA) with our
trading partners who indicate their interest in 1999. Further, as a concession to our
treaty partners, government has approved a lower treaty rate of 7.5 percent on dividends,
interests, rent and royalties when paid to a bona-fide beneficial owner of a treaty
country.
b. Joint Venture Cash Calls
Crude oil sales will continue to be our major source of revenue until the
national economy is diversified. The funding of petroleum operations is therefore
essential. However, in the light of the poor state of our finances, government is
currently exploring alternative sources of funding the government shares of the Joint
Venture operations with a view to solving the cash call problem permanently. In the same
vein, government will consider raising project-tied financing in respect of Joint Venture
Projects aimed at encouraging exports in the oil and gas sectors of the economy.
c. Incentives to Gas Sub-Sector
In 1998, Government invested US$300 million as part of its capital contribution
in the third train of the Liquefied Natural Gas project. Generous tax incentives have been
given to companies that carry out the exploitation of natural gas and utilize the
associated gas for commercial purposes. The incentives will continue in 1999 while details
of additional incentives will be provided.
SOLID MINERALS SECTOR
This administration strongly believes that if proper attention is given to the
solid minerals sector, it is capable of generating substantial revenue and employment to
supplement those derivable from the oil and non-oil sectors. In 1998, government approved
the new Solid Mineral Policy. It also revised laws and regulations to make the sector
competitive with those of other mineral-based economies as well as provide generous
incentives for prospective investors.
In 1999, Government will continue to attach emphasis to this sector through
exploring possibilities for Joint Venture programs, production sharing and other strategic
investments between Nigerian Mining Corporation and Private Investors to facilitate the
exploration and exploitation of the country's mineral deposits
Government has no resources to continuously subsidize inefficient and loss
making parastatals. Privatizing such investments has now become a cornerstone of
government policy. In pursuing its privatization objectives, government has instituted
procedures that are transparent to ensure maximum return in the disposal of its assets.
A decree shall be promulgated expeditiously to give legal backing to the
privatization program. Work on the regulatory framework and institutions will also be
accelerated.
Competition and Deregulation
In 1998, Government repealed and amended 11 legislation that hitherto inhibited
competition or conferred monopoly on public enterprises in petroleum, telecommunications,
power and mineral sectors. To further consolidate this policy, government has licensed a
few private telecommunication companies. Government is encouraged by the response of the
private sector so far to this policy reform. Our statutes are still being reviewed with
aim of eliminating completely all-outstanding sectors constraining competition in other
sectors.
Elimination of Dual Exchange rate
The application of the dual exchange rate continues to cause distortions in the
economy and offers considerable incentive for round-tripping in our foreign exchange
operations. Whereas, public expenditure is transacted at the autonomous rate, revenue is
monetized at official rate giving rise to a mis-match between revenue and expenditure.
Moreover, economic viability of projects funded at official rate cannot be properly
evaluated and may thus encourage unprofitable projects. Abolition of the official exchange
rate will remove a long-standing opportunity for personal gain at the expense of the
public purse. Accordingly, the official exchange rate is hereby abolished with effect from
1st January 1999.
Monetary and Credit Policy
The focus of monetary policy during 1999 will remain the maintenance of price
stability while at the same time accommodating Government's efforts to stimulate output
growth. The growth of monetary and credit aggregates will be contained at levels that will
guarantee single digit inflation rate. The promotion of the stability of the exchange rate
will also be a policy focus.
The CBN will continue to rely on Treasury bill sales at market-determined,
competitive interest rates, while the range of instruments available for mopping up excess
liquidity in the system will be broadened to include issuance of development stocks and
national savings certificates.
Government is concerned about the widening gap between savings, deposits and
lending rates of commercial and merchant banks. The Central Bank has been directed to
discuss with the banks on how to narrow the margin so as to impact positively on bank
customers.
Government will provide incentives to banks in 1999 to encourage the provision
of medium and long-term facilities to the agricultural and solid minerals sectors as well
as to small and medium enterprises. This will assist in the diversification of the economy
and the development of non-oil sector in general.
Transfer of Commercial Banking Functions From the CBN to Commercial/Merchant Banks
Government has directed that the commercial banking functions presently
performed by the Central bank of Nigeria (CBN) be transferred to Commercial and Merchant
Banks by the end of March, 1999. Ministries and parastatals will be free to negotiate and
reach agreement with Commercial and Merchant Banks subject to the usual clearance with the
office of the Accountant General of the Federation.
Conversion of Merchant Banks to Commercial Banks
Government has decided that any merchant that so wishes may convert to a
commercial bank. This measure is being taken to remove the obvious disabilities presently
suffered by merchant banks, especially as the equity base of the two types of banks is now
the same. It will also help to deepen banking habits in the country. The CBN will publish
the conditions and detailed guidelines for the conversion soon.
Restoration of CBN Autonomy
In recognition of the critical role which an independent Central Bank can play
in the maintenance of price stability and sound economic management, the government, after
due consideration, has decided to grant the CBN autonomy in the formulation and
implementation of monetary policies. The government is convinced that an independent CBN
would serve the best interest of our national economy. The relevant law has already been
amended.
Capital Market Reform
Government is fully convinced about the need for effective institutional
arrangements that will engender stable and strong financial systems. Consequently, a
number of measures will be taken in 1999 pursuant to the on-going capital market reform,
to strengthen the market infrastructure.
The Investment and Securities Decree, which will transform the Securities and
Exchange Commission into a bigger, stronger and a more effective institution, will be
finalized. Efforts will also be continued to ensure the early take-off of the Abuja Stock
Exchange.
External Debt Management
For a number of years now, the 2 billion US Dollars usually set aside for
servicing Nigeria's external debt has fallen below the requirement of our creditors. Even
though this practice has resulted in the accumulation of substantial arrears, Government
is only able to earmark the sum of 1.5 billion US Dollars for external debt service this
year, due to resource constraints in 1999. It has therefore become imperative for us to
explore options for reducing our debt service payments to affordable and sustainable
levels.
Accordingly, efforts will be intensified to open up negotiations with the Paris
Club, Bretton Woods Institutions and other creditors to seek debt reduction and debt
relief The Ministry of Finance will pursue vigorously the achievement of this goal. We
have initiated discussion with the Bretton Woods Institutions and the Secretariat of the
Paris Club towards evolving a programme aimed at eventually attaining debt relief for the
country. Government will also continue with the debt conversion programme as a vehicle for
debt reduction and investment promotion.
Embargo on External Loans
In view of the projected deficit in the 1999 budgets, there is a need for
Government to broaden the source of funding in order to close the financial gap in the
budget. Accordingly, government has lifted the 1994 embargo placed on external borrowing
particularly with respect to concessionary and project-tied loans and credits Furthermore,
financing of export-based projects, based on the assets and revenue flows of the
enterprise, especially in the gas and oil sectors will be considered.
Petroleum Products Pricing and Supply
The acute nationwide shortage of petroleum products in the country has become a
cause for great concern to the nation. Public sector monopoly of petroleum products
supply, along with the unscrupulous acts of unpatriotic citizens, has been the major
contributory factor to the shortages.
To ensure a lasting solution to the problem, the importation of petroleum
products has been deregulated. Government has also allocated sizeable amounts of funds for
the turn-around maintenance and rehabilitation of the Kaduna, Port Harcourt and Warri
refineries
Government is not unaware of the reaction of our people to the recent increase
in the price of petroleum products by the oil marketers. Government is thus encouraging
the petroleum marketers to enter into discussions with consumer representatives with a
view to moderating the prices to sustainable levels.
Priority Projects
A comprehensive list of priority projects
is being compiled. The debt component of these projects will be reviewed with a view to
restructuring and rescheduling it in line with our cash flow realities.
Wage
Increase
About three months ago the Federal Government approved wage increases for
public servants and directed state and local governments to negotiate appropriate wage
adjustments with their respective employees, based on their financial strengths.
Regrettably, with the dwindling government revenues caused by a sharp fall in oil prices,
the payment of the recommended wage package has become insupportable and unsustainable for
the federal, state and local governments
As it is not our intention to bequeath the incoming civilian administration
with unmanageable economic problems, we are compelled to review the wage increase to
affordable and sustainable levels. In this regard, government has entered into discussions
with the labour unions with a view to arriving at acceptable wage levels.
Foreign
Policy
This administration will continue, in 1999, to pursue its policy of
constructive engagement with other members of the international community. We are
committed to ensuring that Nigeria takes its rightful place among the committee of nations
based on the principles of mutual respect and protection of our national interests. During
the course of 1998, the international community responded positively to our posture of
reaching out in accordance with these principles. We appreciate such warm responses and
support, and hope the international community will continue to support Nigeria at this
crucial stage of our history not only in ensuring the successful implementation of our
political transition but also our economic reform programmes
The global economic recession we are all witnessing of recent in many parts of
the world calls for serious concern. Nigeria belongs to an integrated, inter-linked world
economy. Given the already existing structural weaknesses of our national economy, we are
not immune to the problems ravaging national economies in other parts of the world. To
reduce our vulnerability, Nigeria requires substantial capital inflow to complement
domestic resources in order to revamp the economy.
Government would, therefore, vigorously pursue economic diplomacy to mobilize
the support of the international community for Nigeria’s policy reform. This would
enable the country to attract foreign investments as well as provide the enabling
environment for a more favourable consideration for Nigeria's request for external debt
relief. Bilateral talks between Nigeria and other countries and multi-lateral institutions
will also emphasize the issue of trade and development.
National Honours and Awards
This year, government has decided to
resuscitate the tradition of conferring National Honours and Awards which has been
suspended since 1984. The National Honours and Awards is to honour deserving Nigerians,
who have rendered special and outstanding services in their various fields of
specialization to the benefit and progress of the nation. as a result of the long break,
over 750 recipients will be honoured. The award will be conferred during the early part of
the year. It is our hope that the revival of this tradition will motivate the nation's
citizens to greater accomplishment
Democratization Programme
I am happy to note that the democratization programme has been on course. The
success of the local government elections and the enthusiasm that Nigerians exhibited in
choosing those to govern them demonstrate the efficacy of the democratization proqramme
The Report of the Constitution Debate Coordinating Committee has been submitted
to Government on schedule. Government will review this report and take a decision on the
Committee's submission early in the year. As the military prepares to hand-over the reigns
of governance on May 29, 1999, I urge all of us to join hands in ensuring the success of
the remaining elections. I once again call on our politicians to play the game according
to the rules and eschew the politics of bitterness and unnecessary accusations
Governance
This administration has repeatedly stressed its determination to combat
corruption and improve the governance of our nation. This reflects our firm belief that
sound macroeconomic policies and structural reforms alone will not be enough to put
Nigeria on the path of sustainable growth. We must, therefore, also tackle the pervasive
corruption and the deterioration in the rule of law, which stand in the way of a great
nation.
It is in this light that the funding of the Judiciary and the Nigeria Police
Force will be enhanced to adequate and sustainable levels. The administration has also
approved the appointment of additional Justices of the Supreme Court and Court of Appeal,
while their retirement age and that of Chief Judges of the State High Courts has been
extended to 70 years.
Budgetary and National Discipline
My dear country men and women, let me at this juncture draw your attention to
the sacrifice and discipline required for the successful implementation of the 1999
budget. Given the uncertain and dwindling nature of our revenue from oil, upon which we
are heavily dependent, there must be great prudence in government expenditures. Public
officers in ministries and extra-ministerial departments must ensure that expenditures are
incurred for only essential purposes, in order to control overhead costs. The Ministry of
Finance, in conjunction with the Office of the Secretary to the Government of the
Federation will put in place necessary measures to control costs and wasteful
expenditures. This calls for cooperation and sacrifice on the part of all government
employees.
This administration is, of course, fully aware of the sacrifices already being
made by its workers. Indeed, we are painfully aware of the sacrifices all Nigerians have
been making these past years. This is why we are anxious to put in place policy measures
designed to bring long-lasting relief to our citizens Unfortunately, however, as in
treating malignant diseases, curative measures bring pain first before the desired relief.
Our economy has long been in a malignant state. We do urge our fellow countrymen to
appreciate this. We are confident that before long, our remedial policy actions would
bring relief to our homes.
This administration is also aware of the dissatisfaction among certain segments
of our population arising from certain government actions or inactions in the past.
Genuine as such grievances may be, we cannot allow the continued reckless expression of
such feelings. The development in the oil producing areas of Niger-Delta region is a case
in point. While we appreciate the feelings of the people in the area over their sad
condition, this administration notes with great displeasure the disruptions of the
activities of the oil companies, government and private enterprises by campaign youths.
Seizure of oil wells, rigs and platforms as well as hostage taking and
vehicular-hijacking, all in the name of expressing grievances are totally unacceptable to
this administration.
We are no doubt committed to freedom of expression, the right to dissent, and
all other basic freedoms and rights that are the hallmarks of a decent, civilized open
society. The recent activities in the Niger-Delta region are a flagrant abuse of our
commitment to such rights and freedoms. This administration will not allow lawlessness and
anarchy to camouflage as right or freedom. We will not accept brazen challenge to the
State authority under threat of violence as recently happened in the Niger-Delta region.
Government has a responsibility to safeguard the State and the security of life and
property of all its citizens and those of foreign nationals on our soil carrying out their
legitimate pre-occupations. This administration is resolved to do just that.
I will, therefore, appeal to all those that have been engaged in the
unacceptable excesses of the recent past in the region to stop such actions henceforth, in
the interest of peace and decency. This administration is convinced that the Niger-Delta
region stands to reap tremendous dividend by dissent through dialogue rather than dissent
through violence. Such is the path to a civilized and great society which we are all
striving to build.
Conclusion
Finally, I must express sincere and heart-felt appreciation to all and sundry
for the very warm support and cooperation they have accorded this administration since our
assumption of office last June. This has constituted the bedrock upon which the success of
the democratization programme has been constructed. It is my hope and expectation that we
can continue to rely on your goodwill, support and prayers as we march towards the
emergence of democratic governance in the country.
I wish you a happy and prosperous 1999 and a happy Eid el-Fitr in advance.
Thank you and God bless us all.
Guides
Channels