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The Conduct of Fiscal Policy
Fiscal Policy 1994
The objectives of 1994 fiscal policy were informed by the major economics problems at the end of 1993 which included high and rising inflation rate, high unemployment and unsatisfactory economic growth. Against this background, the broad objectives of fiscal policy in 1994 included the restoration of fiscal discipline, improved financial transparency and accountability, restoration of macroeconomic stability, and stimulation of growth in the productive sectors.
The total budgetary estimate for the year was N110.5billion comprising N79.2b and N31b for recurrent and capital expenditures respectively. The specific fiscal measures in the 1994 Budget included maintenance of an overall balanced budget by matching the estimated federally retained revenue with total expenditures; progressive tax policies with the intention of reducing tax burden on workers and encourage investment.; and introduction of Value Added Tax (VAT) at a flat rate of 5 percent.
An assessment of the fiscal operations of the Federal Government showed a reduction in the budget deficit from N107.18billion in the previous year to N70.82billion, representing 15.4 percent and 7.9 percent of the GDP, respectively. The primary balance ended up with a deficit equivalent to 2.2 percent of GDP, as against the surplus envisaged in budget program while the overall deficit contrasted with the balanced budget planned for the year.