Despite continued decline in crude oil prices, the Nigerian government says it does not intend to revise the oil benchmark in the budget further down.
Since the crash of oil prices from over $115 per barrel in July, the government has reduced the oil benchmark from $78 to $65, as contained in the 2015 budget proposal.
But, the price has continued to fall, with crude price at the international market dropping to as low as $54.44 per barrel on Wednesday.
In spite of the decline, the Minister of State for Finance, Bashir Yuguda, said the government would not review the benchmark further the benchmark, as price intelligence has shown that crude oil prices would average between $65 and $70 per barrel in 2015.
The government’s confidence, the minister pointed out, was anchored on the fact that American shale oil currently driving price shocks equally runs the risk of becoming unsustainable, as it was being produced at a high cost of at least $65 a barrel.
Analysts say, if sustained for long, government spending projections during the year could be significantly affected.
But, the government has said it is prepared to introduce further austerity measures to cushion the impact of further price fall outside the proposed range.
Amid declining revenues in the wake of the rapid fall in global in oil prices, the minister said the government would do all within its capacity to maintain growth and stability in the country’s economy in 2015.
He said the government would not waver in its commitment to the diversification of the economy by boosting non-oil revenues, plug loopholes and cut unnecessary expenditures.
Describing 2014 as a challenging year, Mr. Yuguda said the country managed to maintain a stable economic growth and re-established itself as Africa’s largest economy.
Mr. Yuguda said the Development Bank of Nigeria, DBN, planned to take off in January 2015, was in line with government determination to sustain growth in the economy and improve medium-to-long-term financing for Nigerian businesses.
The Minister said the DBN would utilize an on-lending model to channel financing through existing commercial banks as well as restructured specialized banks, such as the Bank of Industry, BOI, and the Bank of Agriculture, BOA, to fund businesses to deepen growth and generate more jobs.
He identified the partners that have committed to invest in the bank as the World Bank, the Africa Development Bank, the BNDES Bank in Brazil, and KfW in Germany.
The World Bank and AfDB, he said, have each pledged $500 million support for the take-off of the bank, adding that the European Union had also indicated interest in investing in the bank through the European Investment Bank, EIB.
Besides, he said the government has set aside N4 billion in addition to the N16 billion already provided in the 2014 budget for the take-off of the project.
“The existing Bank of Agriculture and Bank of Industry will be re-structured as specialized institutions to retail financing from this new wholesale development bank,” Mr. Yuguda said.
He cited the Capacity Enhancement Programme, CEP by the Federal Inland Revenue Service, FIRS, as part of efforts to boost non-oil tax revenue, to enable the agency surpass its 2014 target performance by about N160 billion.
In addition, Mr. Yuguda said government was working on a system of tax incentives for Micro-Finance Banks in order to promote financial inclusion for the poor.
On the fiscal restructuring measures announced recently by government, the minister assured that critical infrastructure projects would not be affected, describing them as key to economic growth and development as well as job creation.
The areas that would be affected, according to the minister, would be those with the least negative impact on the generality of Nigerians.
These include widening the tax net, and pushing for higher levels of compliance; introduction of a new tax on luxury products as well as reducing expenditure by cutting foreign travels by government officials, especially with regards to foreign training programmes.