The federal government on Wednesday laid the N4.357.96 trillion budget for the 2015 fiscal year before the respective houses of the National Assembly, stating that the economy will grow by 5.5 per cent in 2015, down from an earlier projection of 6.4 per cent, due to lower oil revenues.
The budget, which was laid by the Coordinating Minister for the Economy and Minister of Finance, Dr. Ngozi Okonjo-Iweala, was predicated on $65 per barrel oil benchmark and an exchange rate of N165.00 to the dollar.
Okonjo-Iweala was accompanied by Minister of State for Finance, Bashir Yuguda, Director General of Budget Office, Bright Okogu, and some officials of the finance ministry.
The budget comprises N2.622 trillion for recurrent expenditure and N627 billion as capital expenditure, following a downward review of the Medium Term Expenditure framework (MTEF) two times owing to tumbling oil prices.
The budget also consists of N102 billion for the Subsidy Reinvestment and Empowerment Programme (SURE-P), N91 billion for kerosene subsidy and N3.602 trillion at the government’s revenue target in 2015.
The budget will be driven by a projection of 2.278 million barrels per day oil production.
Reacting to the budgetary estimates, financial analysts were of the view that the government should have largely cut the personnel and running costs of government institutions with the understanding that public officers would make sacrifices in view of the drastic fall of oil price as was the case in the United States during the global meltdown of 2008 and 2009.
They found it curious, for instance, to find that the National Assembly still retains its huge annual budget of N150 billion, thus implying that the legislative institution, like several other government institutions, have nothing to lose despite the prevalent economic downturn.
Fielding questions from journalists after presenting the budget before the federal legislature, Okonjo-Iweala said the budget would be predicated on a growth rate of 5.5 per cent and inflation rate of 7.9 per cent.
According to her, the focus of the budget is to diversify the economy by raising non-oil revenue through various types of taxes and policies, arguing that despite the economic downturn, prices of food have remained stable.
“We have submitted the 2015 budget. The highlights are the benchmark price for oil of $65; production figure of 2.27 million per barrel per day. We have estimated a GDP growth based on the circumstances of the country, which will be about 5.5 per cent.
“This is down from the 6.35 per cent we had earlier from the National Bureau of Statistics, which is still one of the best growth rates in the world.
“The budget seeks to protect the average Nigerian because the key is that it focuses on the diversification of the economy and has been working because food prices have not risen in spite of the depreciation of the naira.
“If you check all around the markets, you will observe that the average Nigerian is still enjoying stable food prices. In some places like Enugu, the price of garri (cassava flour) has even fallen.
“The inflation rate as estimated by the National Bureau of Statistics has fallen from 8.1 to 7.9 per cent in November.
“This budget really focuses on moving us to diversifying the economy and raising non-oil revenues. We have made up for the fall in the budget benchmark by $13 to $65 by raising non-oil revenue through various types of taxes and policies. The surcharge on luxury goods is there plus additional tax efforts to close leakages in revenue,” she said.
Okonjo-Iweala added that the government will effect changes in the cost of running its operations
According to the minister, “Although in the short term, no such stringent economic measure will be pursued, but eventually in the longer term, we would be able to look at how we re-structure the cost of governance.”
She said in the meantime, the government hopes to keep emoluments flowing.
“We want to make sure that people get their salaries and wages and pensions are paid. We don’t want to make any adjustments on the back of our pensioners and workers,” the CME said.
Despite the uncertain climate brought on by declining oil revenue, the minister said the federal government is anticipating further revenues, having put in place fiscal mechanisms that would check wastages.
With projected revenue of N3.6 trillion, Okonjo-Iweala explained that the government “tried to make up for the drop from the $78 per barrel budget benchmark to $65 by raising non-oil revenues”.
“This budget points to the fact that this country is a non-oil country and I think we want Nigerians to begin to think of the country in that way. We have worked very hard with the guidance of Mr. President vto move on non-oil revenue.
“We have closed many loopholes and leakages. We have tried to broaden the tax base. We have sped up the audit, we are looking for revenue everywhere. And we have closed some exemptions, as all of this will bring additional revenues into coffers,” she explained.
Part of the efforts being made to save money, she disclosed, are to review administrative expenditure, review purchase of equipment, and excision of foreign travel and institutionalise in-country training for all federal personnel.
“An exception to the latter will be if somebody is paying for you, then you will be able to go out or if it is a typical government directive to go out,” she said.
In the meantime, the federal government yesterday rolled out specific measures expected to come on stream in 2015 for the country to weather the harsh economic situation occasioned by dwindling oil revenue, without resorting to external borrowing.
Among the steps is the introduction of revenue-yielding measures, including surcharges on luxury items, which are expected to contribute N10.56 billion to the federal till in 2015.
The list of luxury items billed for surcharge in the 2015 fiscal year include a 10 per cent import surcharge on new private jets, which is estimated to yield about N3.7 billion; 39 per cent import surcharge on luxury yachts, estimated to raise N1.6 billion; and 5 per cent import surcharge on luxury cars, with an estimated yield of about N2.6 billion of additional revenue.
Surcharges on business and first class airline tickets; imposition of a 3 per cent luxury surcharge on champagne, wines and spirits are also expected to generate about N2.3 billion, while a 1 per cent FCT mansion tax on residential properties with a value of N300 million and above is projected to yield an additional N360 million.
The finance minister, who disclosed this during a public presentation of the 2015 budget in Abuja, said the aggregate budget revenue for 2015 stands at N3.602 trillion, comprising oil revenue of N1.918 trillion and non-oil revenues of N1.684 trillion (implying a ratio of 53 per cent oil revenues to 47 per cent non-oil) to fund an aggregate budget
expenditure of N4.358 trillion proposed for 2015 budget.
This, she said is about 8 per cent less than in 2014 Appropriation Bill, adding: “This expenditure figure is made up of N412 billion for statutory transfers, N943 billion for debt service, N2,616 billion for recurrent (Non-Debt) and N634 billion for capital expenditure (inclusive of SURE-P).”
She also disclosed that the budget deficit for 2015 will be N755 billion (or 0.79 percent of GDP), while domestic borrowing was put at N570 billion, down from N571.9 billion in 2014.
On independently generated revenue, the minister said: “Over the last three years, government has been working to increase its independently generated revenues (IGR) and has in fact, sustained an upward trajectory in IGR receipts.
“Actual receipts have continued to grow from about N182 billion in 2011 to N274 billion in 2013 and then, N328 billion as of October 2014.
“While this is encouraging, there are still leakages and incidences of non-remittance of requisite funds to the treasury by some agencies.
“Mr. President recently summoned a meeting with revenue generating agencies to address this issue, and subsequently issued an unequivocal directive to all revenue agencies to ensure remittance of their obligations to the treasury.
“With this strong support, we are working with the banks to ensure strict compliance, and so we have projected IGR receipts of N450 billion for 2015,” the minister said.
Also on tax revenue, she said in the short term, the government is determined to improve tax revenues not by increasing tax rates as many have advised, “but rather as a pro-people administration, by strengthening our tax administration”.
“We aim to plug leakages, increase the tax base and improve tax collection efficiency. In this respect, Messrs. McKinsey & Co. was engaged to work with the Federal Inland Revenue Service (FIRS) about a year ago, before the oil price drop, to enable FIRS improve on tax collection.
“I am pleased to inform you that so far, this effort has already yielded additional non-oil revenue of about N143 billion for government in 2014.
“In 2015, we are ramping up the FIRS/McKinsey initiative to contribute an extra N160 billion in tax receipts and an aggregate of about N460 billion over and above the 2014 levels in the 2015-2017 period,”
Okonjo-Iweala stated.
On tax waivers and exemptions, the minister disclosed that analysis had shown that about 30 per cent of those that received tax waivers from government, especially under the pioneer status scheme now abuse the system.
According to her, “As a short-term measure, government has commenced a review of the implementation of pioneer status exemptions to some oil companies, which could unlock up to N36 billion of additional tax revenues in 2015.”
On specific measures to reduce overhead expenditure, she said cuts on international travels and training by 50 per cent for all ministries, departments and agencies (MDAs) were being proposed for the fiscal year, with an expected savings of about N14 billion, while other provisions for overhead expenditure have been dropped completely – saving about N4 billion.
“MDAs’ provisions for the procurement of administrative supplies and equipment will also be cut, saving about N5 billion, while procurement and upgrade of buildings were similarly curtailed, saving about N44 billion just as another N76 billion is proposed for reallocation to more impactful programmes of government in the security, health, and education sectors.
“We have also commenced partial implementation of the government’s white paper on the rationalisation of agencies based on the Oronsaye report. We have built in savings of about N6.5 billion in the 2015 budget from the rationalisation of some agencies, committees and commissions.
“Nevertheless, medium term measures require greater efforts to cut the cost of governance across all tiers and branches of government. This requires support from the legislature to amend laws underpinning certain agencies.
“A list of such laws will be submitted to the National Assembly for consideration by the second quarter of 2015.
“A fundamental restructuring of budgets is required at federal and state levels if fiscal sustainability is to be achieved in the nation’s economy going forward. The high ratio of recurrent to capital spending must be reversed going forward,” she said.
The minister advised the citizenry to support the government in its bid to steer the economy through the difficult times, adding that the situation which is not peculiar to Nigeria, though tough, is surmountable through collective effort.
Giving more details, the Director General, Budget Office of the Federation, Dr. Bright Okogu stated that defence and security, infrastructure, growth stimulating areas and job creation sectors as well as human development would form priority areas of the budget. Defence and security will take N985.79 billion.
On why the $65 per barrel benchmark was being proposed instead of a lower figure considering the continuing fall in oil prices, Okogu said from the position of global analysts, the price of oil is expected to rebound in 2015, but may not get to $100 level.
