Nigeria’s President Goodluck Jonathan has described the 2012 budget as a stepping-stone to the transformation of the Nigerian economy and “our walk to economic freedom”.
Presenting it before the National Assembly Tuesday, he said the journey ahead would neither be easy nor “uncontested”, adding that with a sharp focus, hard work, determination and making careful choices Nigeria would overcome her current economic challenges.
The budget, he said, was not an end in itself but rather, an instrument for the promotion of economic growth, wealth creation, poverty reduction and service delivery to the citizenry.
“Government desires that we should begin to experience a commensurate increase in gainful employment and social well-being of Nigerians with the rate of economic growth. This budget seeks to act, not only to create jobs, but to also lay a solid foundation for sustainable economic growth which would deliver the dividends of democracy to our people. In this respect as you may recall, I hosted a retreat in October this year with the Organised Private Sector (OPS) at which a number of issues including fiscal policy were extensively discussed.
“I wish to reiterate here that the principal objective of my Administration’s fiscal policy in the area of tariffs and trade is to promote industrialisation and the growth of the manufacturing and agricultural sectors of the economy and above all to generate employment for Nigerians. As part of the process to realise this objective, we have commenced the review of the 2008-2012 Customs and Excise Tariffs to correct identified anomalies and introduce policies that will help in the promotion of industrialisation in the country when the review is concluded. In addition, to ensure a level-playing field for businesses, this Administration, beginning from the 2012 fiscal year, will where necessary, only grant concessions or waivers on a sect oral basis. The focus of any concessions will be on expanding domestic production for local consumption and boosting exports, development of value chains, and boosting employment,” he said.
Jonathan said that the Export Expansion Grant (EEG) scheme, which has, over the years, contributed significantly in the diversification of the economy, would be to make it more effective as an instrument for the promotion of non-oil exports.
In the same vein, government would intensify its economic diplomacy within the framework of ECOWAS to ensure that the ECOWAS Trade Liberalisation Scheme (ETLS) achieves its objective of promoting intra-ECOWAS trade and that it is not used as a vehicle for dumping goods in the region.
“For some time now, especially with the advent of the consolidated salary structure, there has been agitation over the lopsided nature of the Personal Income Tax Act and the fact that the tax free allowances were inadequate. I am pleased to announce that I have signed the Personal Income Tax Amendment Act 2011 into law which amongst others has the benefit of reducing, on the average, taxes paid by low income earners and providing a more equitable tax structure for individuals. This law also provides for Tax Appeal Tribunals to listen to, and address concerns of individual taxpayers as a cost-effective administrative intervention prior to recourse to the courts.
“Other fiscal changes to be gazetted shortly, include tax waivers on all bonds and related instruments issued by corporate and other tiers of Government, tax rebates as incentive to companies that create jobs, regulations to support taxpayers’ self- assessment, and regulations to support the growing quest of those involved in social and community development to get tax incentives for those donating to their causes,” he said.
Jonathan announced that at a time when rating agencies were downgrading countries globally, the outlook on Nigeria was recently upgraded from negative to stable by Fitch Ratings.
This favourable rating, he said, could be attributed to Nigeria’s new economic reforms and fiscal consolidation as well as the successful political transition following the 2011 elections.
Government, he said, was determined to pursue policies that would ensure a stable macroeconomic environment through a strong and prudent fiscal policy, manageable deficits, sustainable debt-GDP ratio of no more than 30 per cent and single digit inflation, thereby promoting real growth.
“In this regard, we have initiated steps to increase revenues by blocking leakages from various sources, improve corporate tax collection, and boost internally generated revenue. We also believe that we should be able to earn a lot more revenue from the maritime sector. As part of the on-going port reforms, government will work vigorously to increase our revenue from maritime and related activities.
“Starting in 2012 for the medium term, we shall focus on cutting recurrent expenditure to sustainable levels through reducing waste, inefficiency, corruption and duplication in government. Recent reviews of public expenditures provide a basis for taking such measures. In order to make capital spending more effective, government is introducing a new template for analysing the financial and other factors including the economic rates of return, job creation, and environmental sustainability.
“Similarly, government will continue to prioritise its expenditures while focus will be on the completion of viable on-going capital projects. It is our intention to fund and bring the large portfolio of on-going projects to completion in the next few years while also taking on flagship projects already identified in the Transformation Agenda,” Jonathan said.
The Federal Government, he said, would in the coming year pursue some key structural reforms including the implementation of the privatisation of the power sector based on the Power Roadmap which was unveiled last year.
According to him, the power sector would benefit from liberalisation and privatisation by attracting investors in the same manner as the telecommunications sector had done while government would come up with policies to encourage investment in the downstream sector of the petroleum industry through liberalisation so as to create jobs.
Beginning from next year, he said, there would be a robust programme to strengthen the country’s oil reserve base and increase oil exploration activities in identified inland sedimentary basins, outside the Niger Delta, with the requisite potential for the production of oil and gas, particularly the Chad Basin.
The Federal Government, he said, was equally conscious of the need to bring the Petroleum Industry Bill (PIB) debate to conclusion so as to give investors the comfort and policy certainty that they require in the sector.
Besides the reforms expected in the oil sector, he said, government would introduce further fiscal policy measures to support the development of the agricultural sector.
In this respect, the duty on machinery and certain specified equipment for the sector would, effective January 31 2012, attract zero duty while high duties would be imposed on rice and wheat importation to stimulate domestic production.
Government would also introduce policies to encourage the substitution of high quality cassava flour for wheat flour in bread-baking. Bakeries will have 18 months in which to make the transition, and will enjoy a corporate tax incentive of 12 per cent rebate if they attain 40 per cent blending. However, importation of cassava flour will be prohibited effect from March 31st 2012.
“All equipment for processing of high quality cassava flour and composite flour blending will enjoy a duty free regime as incentive to bakers for composite flour utilisation. From July 1 2012, wheat flour will attract a levy of 65 per cent to bring the effective duty to 100 per cent, while wheat grain will attract a 15 per cent levy which will bring the effective duty to 20 per cent.
“Similarly, there will be a levy of 25 per cent on brown rice to bring it to 30 per cent. In addition, to encourage domestic rice production, a levy of 40 per cent will be placed on imported polished rice leading to an effective duty rate of 50 per cent. Effective December 31st 2012, all rice millers should move towards domestic production and milling of rice, as the levy of 50 per cent will be further raised to one hundred per cent. Let me add here that no waivers or concessions will be entertained for rice and wheat importation,” Jonathan warned.