The Federal Government has announced a multi-pronged strategic response to mitigate the adverse effects of the decline in global oil prices, protect growth, reassure investors and keep the economy on a stable course through the crisis which has seen a significant drop in oil revenues for Nigeria and other oil producing countries since June.
The response is a mix of measures designed to boost non-oil revenues further, plug loopholes and waste and cut unnecessary expenditures in order to cope with the situation.
It is also scenario-based and additional measures will be introduced if oil prices fall further.
As part of the response, the Medium Term Expenditure Framework (MTEF) and the Budget 2015 proposal to the National Assembly have also been revised. Government is now proposing a benchmark of $73 dollars per barrel to the National Assembly compared to the earlier proposed benchmark of $78.
Addressing a Special Media Briefing in Abuja today, the Coordinating Minister for the Economy and Minister of Finance, Dr Ngozi Okonjo-Iweala declared that the Federal Ministry of Finance has been keeping a close eye on movements in global oil prices because of the critical importance of oil as the country’s most important source of revenue.
She explained that even though the government has been working hard on several scenarios and contingency plans in readiness for any eventuality, it was important to proceed in a measured manner based on a complete understanding of the challenges.
“Given the nature of the oil market, we needed to see the extent and trend of the oil price in order to take the right measures. Panic is not a strategy. It’s important that our strategies are based on facts and a clear understanding of both the strengths of the economy and the challenges posed by the drop in oil prices which is currently at $79 for our premium Bonny Light Crude.”
“The drop in oil prices is a serious challenge which we must confront as a country. We must be prepared to make sacrifices where necessary. But we should also not forget that we retain some important advantages such as a broad economic base driven by the private sector and anchored on sound policies. Our strategy is to continue to strengthen the sectors that drive growth such as agriculture and housing while reducing waste with a renewed focus on prudence.”
The Minister was accompanied by the Director-General, Budget Office of the Federation, Dr Bright Okogu; Accountant-General of the Federation, Mr Jonah Otunla; the Acting Chair, FIRS, Alhaji Kabir Mashi and other top officials.
She recalled that in the last three years the Executive in its discussions on the budget with the National Assembly has consistently advocated prudence and a low budget benchmark to encourage more savings.
She stressed that even though the drop in oil prices is a serious challenge, it is also an opportunity for the country to focus on greater diversification and refocus efforts towards the non-oil sectors in preparation for a future with less oil revenue.
She stated that the decline in oil prices has given additional impetus to the Federal Government’s focus on increasing non-oil revenues. In this regard, the collection target for the Federal Inland Revenue Service (FIRS), which has been working with Mckinsey to increase receipts will be revised upwards for next year. The country has had good success in reaching the initial target set this year of N75 billion; so far N65 billion of this has been collected. For 2015, the revised target is N160 billion above the 2014 base.
As part of the efforts to reduce expenditure, international travel within the public service will be severely curtailed. But critical infrastructure projects will not be affected because they are key to economic growth and development as well as job creation.
The implementation of the new mortgage system including the current processing of over 66,000 applicants for mortgages will go on as planned so that the country reaps the strong benefits that will come from unleashing the housing revolution which is attracting serious interest from local and international investors.
Also unaffected are public sector wages as well as key initiatives in education, health and other areas critical to the country’s human development.
A key initiative on the revenue side is a surcharge on luxury items details of which are being worked out.
