The President understands that the economy and the people are serious issues that cannot be neglected by any government worth its salt.

While Yar’ Adua dreams of a bright and prosperous future for Nigeria, he did not forget that "we must have the courage to do all that is right, decent and compassionate; all that needs to be done for our nation’s restoration. We must do this always with strict adherence to the rule of law and due process, however inconvenient sometimes. We must not shy away from the path of fiscal responsibility and prudence".

Besides, the President explained that the preparation of this budget has been informed by the need to be disciplined, focussed and strategic.

"We placed emphasis on containing costs so as to enhance value for money. We followed a well-defined participatory process aimed at ensuring that spending proposals are properly linked to our Seven-Point Agenda. All the major line Ministries were requested to reappraise in detail their initial proposals, keeping in view the need to strengthen public expenditure management and ensure transparency, accountability and value for money, with emphasis on completing on-going projects. This has helped us to make significant spending efficiency gains. It is our intention that this level of attention to detail will continue to underlie all future budget preparation and implementation," he said.

According to Yar’Adua, the 2008 budget builds upon and consolidates past macroeconomic and budgetary reforms.

"It gives priority to, and makes ample provision for improving physical infrastructure, particularly power and transportation, human capital development, the Niger Delta, and social safety nets. These are all encapsulated in the Seven-Point Agenda of this Administration," he added.

Yar’ Adua also informed the Assembly that "I have assented to the Fiscal Responsibility Bill after due consultation with the State Governments whose support and concurrence is critical to the successful nationwide implementation of the provisions of the law. It is hoped that this will help to institutionalise and formalise the observance of fiscal discipline."

He restated his administration’s appreciation of the thorough and expeditious manner in which the National Assembly has consistently considered matters brought before it by the Executive.

He further reassured the legislators that "by this very cooperative relationship, founded on mutual respect and a mutual recognition of our shared responsibility to rebuild our nation and reposition her for democratic good governance, peace, security, sustained growth and development."

The president stressed that Nigeria has experienced tremendous progress since the turn of the century.

"This was made possible by our commitment and resolve for progress, sound macroeconomic policies, a plethora of reforms within the context of the National Economic Empowerment and Development Strategy Initiative (NEEDS), the Millennium Development Goals (MDGs), the Seven-Point Agenda and the implementation of the Policy Support Instrument (PSI) framework. The sustained rise in international oil prices was also a significant contributory factor," he said.

In his assessment, Yar’Adua noted that "I am delighted to report that our economy has been one of the fastest growing, not only in Africa but also in the world. This growth rate is forecast to continue into 2008 and 2009. In particular, the last five years have indicated even brighter prospects for sustained growth. Based on current trends, real GDP growth for 2007 – 2008 is set to average 7.0 per cent per annum, much better than the performance of the previous two decades when GDP growth averaged 3.0 per cent per annum. Significantly, this rate of growth has been much higher than our population growth rate. This has resulted in a sharp increase in GDP per capita after a prolonged period of stagnation, from about US$400 at the turn of the century to well over US$1000 by the end of 2007. However, in order to meet our growth and development targets by the year 2020 it is imperative that our economy grows at an even faster rate."

Furthermore, the president said "our collective challenge today is to translate these macro-economic gains into tangible improvements in the living standards of our people. Despite the rapid growth of the economy, about 50 per cent of our population still live below the poverty line. Oil still accounts for about 40 per cent of GDP, 90 per cent of exports and 80 per cent of government revenue. The challenge therefore is to reverse these ratios."

He added that "we are inexorably committed to pursuing the goal of making our economy one of the twenty biggest economies in the world by the year 2020. To this end, we will endeavour to fast track the key parameters of our development paradigm as outlined in our Seven-Point Agenda."

The president said further that "key to our developmental aspirations is the need to maintain macroeconomic stability and fiscal responsibility. While our overall strategy is to focus on the completion of on-going projects, we have also taken onboard a few new projects targeted at improving infrastructural deficiencies."

Reacting to the budget proposal, a reknown banker and Regional Head of Research, Africa, based in London, Mrs. Razia Khan said while the federal government budget proposals are sound – in real terms, overall spending will fall, there is an important debate simmering in the background, with fiscal consequences of its own."

She, however, recalled that since 2004, Nigeria has been saving some of its oil windfall,

but there has been uncertainty about whether the country’s Excess Crude Account reflects a federation saving, or a Federal Government saving.

"According to Nigeria’s constitution, any oil revenue must be shared between the 3 tiers of government: the Federal Government, state governments, and local governments.

But, while the Federal Government has signed up to the idea of fiscal responsibility, and legislated a saving of its oil windfall earnings, the other tiers of government have not. In settling this dispute about accumulated excess crude savings, there could well be a USD 4bn disbursement from the excess crude account at some point in the near future. If effected, the Federal Government would earn USD 2bn, the additional USD 2bn

would be disbursed to state and local governments. If spent, policy would be more expansionary than today’s sound proposals imply. In that case, even more would need to be done to tighten the monetary environment," she explained.

Analysizing the budget further Khan explained that "at first sight, it is a sound

budget, with all the right components to suggest that Nigeria’s reform intent remains on track. Throughout the recent oil boom, Nigeria has been criticised for the extent of spending increases it has approved, with little to show for the double digit annual rises that had become the norm. In contrast, in 2008, only a 3.3 per cent increase in spending is planned. Excluding investment in joint ventures with oil companies, spending is to

increase only 0.1 per cent in 2008. While this is still only a proposal, and the detail may change by the time the budget is eventually approved, for once, there is at least no headline-grabbing implied threat to macroeconomic stability."

According to her, spending will increase in priority areas. Investment in government joint ventures with the International Oil Companies (IOCs) is to increase 10 per cent from the USD 4.5bn set aside in the 2007 Budget.

She added that "this is positive, as Nigeria needs to generate increased fiscal revenue from oil (and admittedly, non-oil sources) in order to meet fiscal demands in the future. Other areas outlined as priorities by President Yar’Adua will also benefit. Spending on education is to increase by 12%, healthcare by 13% and power by 15 per cent. That this will be done within the confines of a negligible increase in overall spending, suggests that there have been cutbacks in other non-priority areas."

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