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Nigerian 2012 Budget For 'Jobs And Growth'

by Lorys Charalambous,, Cyprus

15 December 2011

Nigeria’s President Goodluck Jonathan, during his announcement of the Federal Government’s 2012 Budget proposals on December 13 to the National Assembly in Abuja, said that their prime objective was, “not only to create jobs, but also to lay a solid foundation for sustainable economic growth.”

He disclosed that growth in the economy was already “broad-based”. Nigerian gross domestic product (GDP) grew by 7.85% in 2010 and by more than 7.7% as of the second quarter of 2011. While overall GDP growth is projected to remain strong over the medium term, the non-oil sector continues to be the main driver with increased crop production, growth in wholesale and retail trade and increased financial sector activities.

He disclosed, however, that contributions by the oil sector continue to improve as average daily oil production rose to 2.45m barrels per day in the second quarter of 2011, compared to 2.35m barrels per day in the corresponding period in 2010. Oil revenue receipts by the government this year are thereby likely to achieve targeted levels as a result of relatively higher oil prices and production levels than benchmarked.

The President announced that the government is determined to pursue a programme of fiscal consolidation in 2012, so as to reduce its fiscal deficit and bring its borrowings to a more sustainable level. The federal fiscal deficit in 2012 is projected at about 2.77% of GDP, compared to almost 3% in 2011.

The government intends to realise this target next year by improving revenue collection, reducing recurrent expenditure and increasing the share of capital expenditure in aggregate spending.

With regard to revenues, Jonathan said that “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.”

With the objective being the total transformation of the agricultural sector to enable a movement from traditional farming to modern agriculture as a business for both small and large-scale farmers, the Federal Ministry of Finance will guarantee 70% of the principal of all loans made for supply of seeds and fertilizer by the private sector next year, and the duty on agricultural machinery will, from January 31, 2012, be eliminated.

To encourage the purchase and utilization of locally-produced commodities, and their processing through industrialization, the government is to introduce policies to encourage, for example, the substitution of high quality cassava flour for wheat flour in bread-baking. Bakeries will enjoy a 12% corporate tax rebate if they attain 40% blending, and all equipment for processing of such cassava flour will enjoy a duty free regime.

In addition, from July 1, 2012, wheat flour will attract a levy of 65% to bring the effective duty to 100%, while wheat grain will attract a 15% levy which will bring the effective duty to 20%; and, while a levy of 40% will be placed on imported polished rice leading to an effective duty rate of 50%, all rice millers should move towards the domestic production and milling of rice, as, from December 31, 2012, the levy of 50% will be further raised to 100%.

As part of the same process, the federal government has commenced a review of customs and excise tariffs, to correct identified anomalies and introduce policies that will help in the promotion of industrialization in the country when the review is concluded. In the meanwhile, the focus of any tariff concessions will be on expanding domestic production for local consumption and boosting exports, the development of value added, and boosting employment.

Finally, with regard to “agitation over the lopsided nature of the Personal Income Tax Act and the fact that the tax free allowances were inadequate,” the President announced that he has signed the Personal Income Tax Amendment Act 2011. That, amongst other measures, “has the benefit of reducing, on the average, taxes paid by low income earners and providing a more equitable tax structure for individuals".

Other fiscal changes that the government will introduce 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, and regulations to support taxpayers' self-assessment”.

TAGS: individuals | tax | economics | business | Niger | Nigeria | tax incentives | fiscal policy | gross domestic product (GDP) | budget | tariffs | corporation tax | food | manufacturing | tax breaks | import duty | retail | trade | individual income tax

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