UPDATE: Declining oil prices: Nigeria to revise oil benchmark in 2015 budget

Ngozi Okonjo-Iweala

The Federal Government has said it will send a proposal to the National Assembly for the revision of the crude oil benchmark proposed in the Medium Term Expenditure Framework, MTEF, submitted for the 2015 budget.

The Minister of Finance, Ngozi Okonjo–Iweala, said in Abuja on Sunday at a media briefing on the impact of the declining global oil prices that the revision was part of “a multi-pronged strategic response to mitigate the adverse effects of the decline in global oil prices.”

The minister said the proposal, which would also help protect growth, reassure investors, and stabilize the country’s economy, would involve a slash of the $78 per barrel oil benchmark earlier proposed in the MTEF to about $73 per barrel.

According to the minister, when the MTEF was submitted to the National Assembly, oil prices averaged $85 and $86 per barrel, adding that since then, the trend has been going down, with no hope of an improvement in the foreseeable future.

“Prices are still trending down. Some estimates say this may continue. But, nobody is sure where it will end up. Under these circumstances, we are adopting a scenario-based approach. We are proposing a new benchmark price of $73 per barrel we are sending to the National Assembly for consideration. Based on that we will revise the entire MTEF,” she said.

The minister, who said that government would maintain average daily crude oil production capacity at 2.27 million barrels per day, noted that the decision would also impact projected oil revenue from N7.287 trillion to N6.833 trillion.

In view of the pressures on Federal Government expenditure, the Minister said aggregate expenditure in the budget requires a tinkering, to reduce it from N4.8 trillion initially submitted in the proposed MTEF to about N4.66 trillion.

Besides, the minister said government is to adopt some fiscal measures to be complimented by appropriate monetary policies to boost non-oil revenues.

“The aim of the reviews is to ensure that the economy adjusts to the new trend in a stable manner,” Mrs. Okonjo-Iweala said. “The adjustments are not just about tightening the belt, but trying to increase non-oil revenue to make up for the shortfall in oil revenue.”

She said the diagnoses conducted on the economy by the Federal Inland Revenue Service, FIRS, on leakages in the economic system revealed that only 25 per cent of the Small and medium enterprises (SMEs) in the country were currently registered as tax payers, while the number of audits completed were very low.

Steps taken to plug the loopholes, the minister said, had helped government raise revenue through non-oil revenue sources by additional N160 billion, adding that government has resolved to intensify efforts to improve efficiency, making it easier for people to pay their taxes.

Government, she said, was determined to make another N160 billion over the 2014 figures, apart from making efforts to improve the level of internally generated revenue by collaborating with banks and revenue generating agencies to ensure that revenues collected were remitted on time to government coffers.

Other measures the government was considering include surcharges on some luxury items, such as champagne, alcoholic beverages, yacht, and luxury cars to ensure that well-to-do Nigerians were made to pay a bit more to make the economy and government coffers more robust. In the medium term, she said government would be looking at adjustments to its tax policies to enhance revenue drive.

On expenditure, the minister said though there would be adjustments to remove constraints to the country’s economic growth, it would not affect government’s continued commitment to invest in infrastructure, agriculture, jobs creation, housing, human development, education, and health as well as security.

In addition, she said government would be proposing new measures in the budget to curb expenditures on new equipment, and limit foreign travels by public officials and civil servants to only the essential ones, while all trainings would only be allowed within the country in 2015.

“Mr. President has instructed that only critical travels, which would be examined closely by the Head of Service and the Director General Budget. Any other travel would have to be funded by whoever is inviting the public servant,” she said.

Government, she said, would, in liaison with the Civil service and the lawmakers, look at entities with overlapping responsibilities as well as Commissions that have completed their work and should be closed down in line with the recommendation of the Steve Oronsaye committee on the rationalization of the civil service.

She rejected suggestions that more money should be printed and supplied to the economy as a way out of the crisis, saying this would do more harm to the poor that good, by creating spiralling inflation.

“Printing money without adequate revenue support will lead to serious consequences for the country. This prescription will victimize the poor and middle class that it is supposedly protecting.”

“The expectation is that oil prices will continue to go down, and may actually be a permanent shock. But, Nigeria has got to get ready to manage it. We have the capacity, the economic base, the scenario and additional measures to tackle the problem should the price fall even below the new benchmark, she said.

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