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The Conduct of Fiscal Policy
Fiscal Policy 1996
The 1996 fiscal policy was focused on consolidating and building on the modest gains and stabilization made in 1995. The objectives of the 1996 fiscal policy included enhancement of increased production and productive capacity; encouragement of export promotion and growth; reduction in inflation rate; intensive revenue collection drive; drastic reduction of fiscal deficit through curtailment of wasteful expenditure; stringent control of extra budgetary spending; continued consolidation of the Federal Government revenue and expenditure in order to enhance accountability and transparency. Other fiscal measures included a change in the basis of Personal Income Tax (PIT) from income to consumption; broadening of the base of VAT by eliminating all extra statutory exemptions; and series of incentives in respect of company taxation.
The 1996 total budget outlay was N125billion made up of N48billion and N77billion for recurrent and capital expenditures respectively. The major source of revenue for financing the budget was proceeds from crude oil sales which accounted for 53.3 percent and it was followed by Autonomous Foreign Exchange market which contributed 17.3 percent. The major components of capital spending were the PTF projects and loan capital repayment which, constituted 36.6 percent and 18.9 percent respectively.
The major components of recurrent expenditure were transfer payment including interest payments on debts which constituted 45.4 percent of the total recurrent expenditure while administration took 36.4 percent.
Overall, the fiscal operations of the Federal Government in 1996 resulted in a substantial surplus of N37.04billion, which was almost double the N19billion budget estimate. The surplus represented 1.6 percent of GDP and was due to improved revenue performance and an expenditure contraction within the general framework of fiscal discipline and prudence.