No going back on $65 benchmark, says Minister

03 December 2015, Abuja – As the price of crude oil continues to slide, the Federal Government has remained adamant that it would not revise the budgetary benchmark downward in the new year.

Minister of State for Finance, Ambassador Bashir Yuguda, said though the Federal Government recognises the fact that prices may slide further,it does not intend to revise the benchmark further down.

Oil prices drop

Oil prices drop

The reason for government’s insistence on holding on to the $65 benchmark, Yuguda said is because government is “aware that price intelligence indicates that prices might average between $65 and $70per barrel (pb) in 2015. This is anchored on the fact that American shale oil which is largely driving this price shocks also runs the risk of becoming unsustainable as it is produced at a high cost of at least $65 per barrel.”

Crude oil price slid further, below the 2015 budget benchmark of $65, a trend analysts said, if sustained for long, might affect government’s spending in the year.  However Yuguda emphasised  that the government’s scenario-based approach to the regime of oil price shocks is structured to proactively respond to such situations.

The minister said the   Jonathan  administration  had taken policy decisions to correct the identified structural imbalances in the economy and the concentration of government’s external revenue on crude oil sales.

Insisting that government has made progress in this regard, Yuguda said it was evident in the rebased gross domestic product (GDP), which showed “the strengthening of agriculture, services, construction, hospitality and other non-oil sectors.”

He explained further that critical infrastructure projects will not be affected by the announced fiscal restructuring measures,  describing them as “key to economic growth and development as well as job creation.”

The areas that would be affected by the fiscal adjustments, according to him, are those that would have the least negative impact on the generality of Nigerians, including widening the tax net, and pushing for higher levels of compliance, introduction of a new tax on luxury goods as well as reducing expenditure by cutting foreign travels by government officials to the barest minimum, especially with regard to overseas training programmes.

He said the government will remain resolute “in its resolve to further diversify the economy, significantly boost non-oil revenues, plug loopholes and cut unnecessary expenditures but has restated its determination to maintain growth and stabilise the economy in 2015 despite the challenge of declining revenues among oil producing countries.”

Yuguda however stressed the preparedness of government to introduce further measures “if prices fall outside this range.” He noted that the government initiated “the Capacity Enhancement Programme (CEP) of the Federal Inland Revenue Service (FIRS) to improve non-oil tax revenue”, adding that the agency is expected to meet its target of surpassing 2014 impressive performance by about N160 billion.

Additionally, the government is working on a system of tax incentives for Micro-Finance Banks in order to promote financial inclusion for the poor.



– The Nation

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