The Minister of Finance, Ngozi Okonjo-Iweala, said on Thursday Nigeria has the capacity to initiate appropriate fiscal and monetary strategies to contend with the crisis and potential risks posed to the economy as a result of falling global oil prices.
The minister said government was considering sundry fiscal measures, including setting a target of increasing the non-oil revenues at about N480 billion within the next three years as well as introduction of tax reliefs for capital market operators, to mitigate the negative effect of the dwindling earnings from oil exports on the macro economy.
Mrs. Okonjo-Iweala, who was speaking at the 4th Annual Capital Market Retreat on Thursday in Abuja, said contrary to doubts by some Nigerians about government’s preparedness to contain the shocks as a result of the drop in oil prices, the crisis in the global oil market was long anticipated before it occurred.
She recalled the various fiscal measures adopted by government over the past decade, including the creation of the Excess Crude Account (ECA), which had savings in excess of $22 billion during the 2008-2009 global economic depression period.
The idea of having an ECA, she pointed out, was to create a fiscal buffer to help mitigate the impact of falling oil prices being witnessed at the moment.
Even when the ECA had been drawn down remarkably, the minister said the National Economic Management Team, NEMT, was fully conscious of the mono-commodity base of the economy, with crude oil export accounting for over 70 per cent of the country’s foreign exchange earnings, and was working on short to medium term strategies to cope with the current situation.
Though she admitted tough times ahead for Nigeria to effectively respond to the risks posed by the drop in crude exports earnings, the minister allayed fears that the country may not survive it.
According to her, based on extensive discussions with international experts within the context of emerging developments in the global oil market, the NEMT used three scenario-based approaches to arrive at the revised $73 oil benchmark price proposed for the 2015 budget.
She, however, maintained that even if oil prices were to fall below the proposed benchmark, the NEMT would still use $70, $65 or even $60 benchmark oil price for the 2015 budget without the economy crumbling as some critics of the measures have predicted.
“Panic is not a strategy,” the minister said, adding that government was managing the situation to keep the economy on a stable sustainable course, and would not listen to those who want distract them.
“Our scenario based-approach to managing the impact of the oil price drop is proactive and comprehensive. Even if the price drops to $60 per barrel, government is ready,” she said.
“The common man’s interest is a priority in government strategy for the fall in oil price. That’s why even in implementing cuts in capital budget for 2015, the areas that are of most benefit to the common man – critical infrastructural projects like the Lagos Ibadan expressway, the second Niger Bridge, rail and power projects, that would create jobs and enhance the comfort of our people, will go on.”
She said the pro-common man’s focus can also be seen in the safety nets as a major priority of the present administration, adding that the projection was for two to three million families across Nigeria to benefit from a conditional cash transfer scheme to encourage school attendance, improve health and nutrition, reduce infant and maternal mortality, and so on.
The Government, she restated, was determined to continue to explore non-oil revenue sources to boost the revenue accruals, including a renewed drive to ensure improved filing of tax returns by small and medium enterprises, SMEs, and increasing audit checks from the present three to four times yearly to as many as times as possible to reduce tax revenue losses to government.
The Federal Inland Revenue Service, FIRS, she said, had surpassed its initial revenue collection projection in 2014 budget by N65 billion this year, adding that with its target to raise to N168 billion in the 2015 budget, it was projected that within the next three years the agency could raise additional $3 billion revenues to government.
As part of renewed focus on increasing tax revenues to mitigate the impact of the fall in oil prices, the minister said FIRS was working with Mckinsey to ensure that the set non-oil revenue collection target was realized.
On government’s efforts to support the capital market for growth and as source of long-term financing for infrastructure and other critical sectors funding, the minister disclosed that discussions were ongoing to persuade more entities, particularly the telecom companies, to list their shares in the market.
Other fiscal measures being adopted, she said, include a planned removal of value added tax, VAT, payment by stock-broking companies and introduction other incentives, were being looked into with a view to reducing the cost of doing business in the stock exchange and by implication, deepening the capital base of the market.