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The Conduct of Fiscal Policy
Fiscal Policy 2006
Fiscal Policy 2006
The 2006 budget was a continuation of the
NEEDS reform agenda which
started in 2004.The fiscal policy thrust for the year was anchored on giving a
boost to infrastructural development in order to empower the private sector to
create wealth and protect the poor in Nigeria. Measures were focused on
diversifying and strengthening the economy in order to improve the well being of
Nigerians both now and in the future. This would be achieved given that the
budget was crafted in the context of a Medium Term Expenditure Framework that is
The projected total revenue was
N3.7 trillion made up of
N2.8 trillion from
crude oil sales, oil taxes and income from gas (76.1%), N230 billion from
Companies Income Tax (6.3%), N197 billion from Customs and Excise Duties
(5.4%); and N450 billion from Value Added Tax (12.2%). The larger receipts from
Value Added Tax were based on an increase in the rate. The projected revenue
from the Federation Account was N1.57 trillion while the estimated federal
disposable revenue was N1.52 trillion as a result of provisions made for certain
strategic projects and government agencies.
The projected aggregate expenditure was
N1.88trillion, comprising Statutory
Transfers (N86billion), Domestic and External Debt Service ( N290billion), and
Spending of Ministries and Agencies ( N1.5trillion). A total amount of
N290billion was budgeted for domestic and external debt service. In all, the
projected fiscal deficit was N357 billion, representing 2.4 percent of GDP.
Financing of the deficit was expected from sale of government properties,
privatization proceeds and domestic borrowing.
The links below detail the conduct of monetary policy in the following
- Monetary policy Measures
- Instrument of Monetary Policy
- Monetary Policy Targets
- Monetary Policy Programme
- Appraisal of Monetary Policy
Impact of Increase in International Oil Prices
The impact of crude oil price increases could be significant. A recent
analysis estimates that a supply-induced doubling of prices would boost
inflation in emerging Asia by as much as 1.4 percentage points above baseline.
The inflation effects would be larger if oil importers had difficulties
financing the resulting current account deficits, and also if subsidies that had
hitherto limited energy prices were assumed to be further reduced or eliminated.
For Nigeria, increase in crude oil prices means more foreign exchange earnings
which would likely put inflationary pressure in the Domestic economy. In order
to ameliorate this problem, there is need for effective coordination of monetary
and fiscal policies.
Government Fiscal Operations For Year 2006
Federation Account Operations
Total federally collected revenue increased by 7.5 per cent to N5,965.1
billion in 2006. This amount is 12.7 per cent lower than the budgeted estimate
of N6,836.0 billion due to slow down in crude oil production below the budgeted
level, resulting from Youth restiveness in the Niger Delta. Revenue from non-oil
sources fell by 13.7 per cent to N677.5 billion in 2006. The fall in tax revenue
could be attributed to the implementation of CET under the ECOWAS protocol, the
granting of duty waiver and tax holiday for foreign investors.
Total Expenditure of the Federal Government
The Aggregate expenditure increased by 6.4 per cent to N1,938.0 billion
in 2006. Non debt expenditure rose by 18.2 per cent above the level in 2005 and
was 4.9 per cent above the N1,610.5 billion budget estimate for 2006. Total debt
service payments amounted to N249.3 billion, representing 12.9 per cent of the
Recurrent expenditure rose by 5.4 per cent to N1,290.2 over the level
in 2005 and accounted for 66.6 per cent of the total expenditure. The purchases
of goods and services amounted to NN1,040.9 or 80.7 per cent of the total, while
external and domestic debt service accounted for the balance.
Capital expenditure increased by 6.3 per cent to N552.4 billion in
2006. As a proportion of Federal Government Revenue, capital expenditure was
30.1 per cent, exceeding the minimum of 20 per cent target under the WAMZ
Overall Fiscal Balance and financing
The current account surplus increased by 25.0 per cent to N546.5
billion, while the primary balance recorded a surplus of N795.8 billion as
against the N831.0 billion in 2005.
State Government Finances
The provisional data showed a deficit of N43.0 billion, representing a
decline of 27.0 per cent when compared with N58.9 billion in 2005. The lower
deficit was due to increased statutory allocations from the Federation and VAT
State Governments’ Revenue
The total revenue rose b 8.7 per cent to N1,543.8 billion or 8.4 per
cent of GDP. The allocation from the Federation Account including the 13.0 per
cent derivation was N1,016.1 billion or 65.8 per cent, the VAT pool Account
(N110.6 billion or 7.2 per cent ), Internally generated Revenue (125.2 billion
or 8.1 per cent ), the Stabilization Account (N11.9 billion or 0.8 per cent).
States Government Expenditure
The consolidated expenditure increased by 7.3 per cent to N1,586.8
billion. The recurrent expenditure of N894.3 was 13.3 per cent higher than the
level recorded in the preceding year. Capital expenditure of N584.0 was 13.5 per
cent higher than the level recorded in 2005.
Local Governments’ Finances
The provisional data revealed that Local Governments recorded a surplus
of N8.4 billion, compared with N9.2 billion in 2005. The surplus was due to
increased revenue accruing to the Local Government in 2006.
Local Government Revenue
Total revenue increased by 12.9 per cent from N597.2 billion or 4.0 per
cent of GDP in 2005 to N674.3 billion or 3.6 per cent of GDP. The internally
generated revenue of N23.2 billion accounted for only 3.4 per cent. The low
contribution of the internally generated revenue reflected high dependence on
funds from the Federation Account.
Local Government Expenditure
The consolidated expenditure of the Local Government Councils in 2006
rose by 13.2 per cent to N665.8 billion. Further break down revealed recurrent
expenditure of N398.2 billion higher than the level recorded in the preceding
year by 6.3 per cent and accounted for 59.8 per cent of the total. While capital
expenditure of N267.7 billion was higher than the level recorded in 2005 by 25.4
per cent and represented 40.2 per cent of the total.
|Facts : 7/25/1963
|First Indigenous Governor of CBN:Alhaji Aliyu Mai Bornu was the first Nigerian Governor of the Central Bank of Nigeria from July 25, 1963 to July 31st, 1967.
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