News
FG Unveils Measures To Tackle Oil Price Drop
The Federal Government has announced a multi-pronged strategic response to mitigate the adverse effects of the drastic fall in global oil prices. The measures are also meant to protect growth, reassure investors and keep the economy on a stable course through the crisis.
Addressing a Special Media Briefing in Abuja yesterday, the Coordinating Minister for the Economy and Minister of Finance, Dr Ngozi Okonjo-Iweala declared that the Federal Ministry of Finance has been keeping a close eye on movements in global oil prices because of the critical importance of oil as the country’s most important source of revenue.
The response is a mix of measures designed to boost non-oil revenues, plug loopholes and waste and cut unnecessary expenditures in order to cope with the situation.
As part of the response, the Medium Term Expenditure Framework (MTEF) and the 2015 Budget proposal to the National Assembly have been revised. As a result, the federal government will be proposing a benchmark of $73 dollars per barrel to the National Assembly compared to the earlier proposed benchmark of $78.
The Minister explained that even though the government has been working hard on several scenarios and contingency plans in readiness for any eventuality, it was important to proceed in a measured manner based on a complete understanding of the challenges.
According to her, “given the nature of the oil market, we needed to see the extent and trend of the oil price in order to take the right measures. Panic is not a strategy. It’s important that our strategies are based on facts and a clear understanding of both the strengths of the economy and the challenges posed by the drop in oil prices which is currently at $79 for our premium Bonny Light Crude.”
“The drop in oil prices is a serious challenge which we must confront as a country. We must be prepared to make sacrifices where necessary. But we should also not forget that we retain some important advantages such as a broad economic base driven by the private sector and anchored on sound policies. Our strategy is to continue to strengthen the sectors that drive growth such as agriculture and housing while reducing waste with a renewed focus on prudence.. she added.”
The Minister recalled that in the last three years, the Executive in its discussions on the budget with the National Assembly has consistently advocated prudence and a low budget benchmark to encourage more savings.
She stressed that even though the drop in oil prices is a serious challenge, it is also an opportunity for the country to focus on greater diversification and refocus efforts towards the non-oil sectors in preparation for a future with less oil revenue.
She stated that the decline in oil prices has given additional impetus to the federal government’s focus on increasing non-oil revenues. In this regard, the collection target for the Federal Inland Revenue Service (FIRS), which has been working with Mckinsey to increase receipts will be revised upwards for next year.
The country has had good success in reaching the initial target set this year of N75 billion; so far N65 billion of this has been collected. For 2015, the revised target is N160 billion above the 2014 base. As part of the efforts to reduce expenditure, international travel within the public service will be severely curtailed. From next year, only critical foreign travels will be allowed with the permission of Head of Service of the Federation (HoS).
According to the minister, “any other foreign travel will have to be funded by those inviting civil or public servants and all expenses paid by the inviting body. Same goes for training, local training will be encouraged but expenses for foreign training will be borne by inviting foreign host with permission sought from HoS. Evidence of sponsorship detailing all expenses paid for by inviting body must be tendered before HoS will grant approval.”
She disclosed that there will be a drop in some capital spending but critical infrastructure projects will not be affected because they are key to economic growth and development as well as job creation. Investment in infrastructure, job creation and security will not change but there will be prioritized investment in those with significant economic impact like Lagos-Ibadan Expressway, Second Niger Bridge and rail projects.
The implementation of the new mortgage system including the current processing of over 66,000 applicants for mortgages will go on as planned so that the country reaps the strong benefits that will come from unleashing the housing revolution which is attracting serious interest from local and international investors.
Also unaffected are public sector wages as well as key initiatives in education, health and other areas critical to the country’s human development.
The minister said she was “not sure of what direction to take with taxes but that a key initiative on the revenue side is a surcharge on luxury items details of which are being worked out. Government’s efforts from now she said will be to drive to increase Internally Generated Revenue (IGR) of entities and ensure that they remit these IGRs on time to government coffers. “This economy has to stop talking about oil”
She noted that there will be surcharges on luxury items like champaign, private jets, yachts, so that those well-to-do individuals can contribute more to government treasury.
Also Ministries Departments and Agencies (MDAs) that make surpluses will now be made to remit such surpluses immediately to government accounts while some taxes will be adjusted to enhance revenue.
On calls from some quarters that the federal government should respond to the decline in revenues arising from the drop in oil prices by printing more Naira to fund projects, the Coordinating Minister said that such poorly thought out populist recommendations would be disastrous for the country if implemented.
She said such prescriptions ignore the facts of history as well as the elementary principles of economics. “Printing money without adequate revenue support will lead to serious consequences for the country. It will spur spiral inflation as the experiences of Germany in the early part of the last century and more recently, Argentina and Zimbabwe demonstrate. This prescription will victimize the poor and middle class that it is supposedly protecting.”
Should oil price fall to $70 or lower, government Okonjo-Iweala said has additional measures to ensure softer landing for the economy. The economy she said “continues to exhibit strength but government will not compensate by borrowing or printing currency but will borrow at very low interest rate and no large domestic borrowing.”
She explained that the best way to protect the interest of the ordinary people is to control inflation as much as possible, expand the economic base, strengthen the sectors that drive growth, boost critical infrastructure and create more jobs.
The External Reserve she said is now at $37 billion is still reasonably good, while the Excess Crude Account (ECA) is still good but government will spend part of it on some transparent transactions. “We might tap into half of the ECA between now and the new year. We have arrears on subsidy pending this will be addressed” she said.
The Minister of Industry, Trade and Investment, Dr Doris Uzoka-Anite, has affirmed that Nigeria now has the capacity and materials to manufacture Made-In-Nigeria cars for local use and export.
With the enabling environment being provided by the government, she said manufacturers should be held responsible if the cars are not rolling out by December 2024.
Currently, Nigeria produces less than 10 per cent of the vehicles used in the country.
Last year, Nigeria’s vehicle assembling industry, estimated to be worth around N302billion, tanked to a new low due to increasing production costs and weakened demand for locally assembled automobiles.
According to the Manufacturers CEOs Confidence Index, activities of motor vehicles and miscellaneous assembly deteriorated further below the benchmark (50 points) from 48.6 to 46.7 points.
But speaking at the Automotive Component Manufacturers meeting in Abuja, she noted that the automobile industry is faced with both challenges and opportunities.
A statement issued last Friday by the Director of Information and Public Relations, Adebayo Thomas, said, “In a significant move aimed at fostering sustainable growth and development in Nigeria’s automobile industry, the Federal Government has issued a clarion call to all stakeholders, including manufacturers, dealers, regulatory bodies, and other players in the automobile ecosystem.
“The call comes as part of a broader strategy to enhance the sector’s contribution to the nation’s economy.”
Encouraging the stakeholders to key into the Nigerian Automotive Development Policy, the Minister said, “As far as we are concerned, the auto industry is now set to go.
“We are counting on all stakeholders to make that happen. If we do not produce made-in-Nigeria cars before the end of this year (December), it will be your fault, because I am sitting down here giving you all the assurances that this administration has created the enabling environment to make sure that the auto policy kicks off.”
Anite emphasised the need for collaboration among manufacturers, dealers, regulatory bodies, and other players in the automobile ecosystem, saying by working together, they can address challenges, streamline processes, and drive innovation.
She also urged stakeholders to maintain high-quality standards across the board, including vehicle manufacturing, safety features, emissions control, and after-sales services.
Stringent adherence to quality, she said, will boost consumer confidence and attract investment.
The minister assured all that the government would continue to encourage increased investment in research and development, adding that, innovations in electric vehicles, fuel efficiency, and alternative energy sources are critical for long-term sustainability.
On local content, she also emphasised the importance of promoting local content by sourcing materials and components locally.
By doing this, she said, the sector can create jobs, reduce import dependency, and contribute to economic diversification
In his introductory comments, the ministry’s Permanent Secretary, Nura Rimi, emphasised the significance of team action and shared vision as outlined in the Nigerian Automotive Development Policy.
He also urged stakeholders that the country “will overcome obstacles and unleash the full potential of Nigeria’s automotive component sector.”
He encouraged NADDC and other stakeholders to use the chance to form alliances, explore new areas of collaboration, and devise ways to catapult the automotive components manufacturing industry to new heights of success.
The statement added, “The government’s charge underscores the pivotal role stakeholders play in shaping its trajectory. Their commitment to sustainable practices will drive Nigeria’s automotive sector towards a brighter and more prosperous future.
“Environmental Responsibility: Stakeholders are reminded of their environmental responsibilities. Sustainable practices, recycling, and eco-friendly manufacturing processes are essential for a greener future.”
The Association of Professional Women Engineers of Nigeria (APWEN), Lagos Chapter, has called on President Bola Tinubu to exempt the importation of electronic components from taxation for inventive engineers.
Chairman of APWEN, Ms Atinuke Owolabi, said this a in statement yesterday in Lagos, in commenration of the 2024 World Creativity and Innovation Day, with the theme: “Step Out and Innovate”.
The Tide source reports that World Creativity and Innovation Day is a global UN Day, celebrated on April 21, to raise awareness about the importance of creativity and innovation in problem solving.
This is with respect to advancing the United Nations’ sustainable development goals, also known as the global goal.
Owolabi explained that such a measure would significantly enhance technological progress, support local innovators, and elevate Nigeria as a leading hub for innovation globally.
She stated that in a world marked by dynamic challenges and unprecedented opportunities, creativity and innovation stand as the driving forces behind progress and transformation.
According to her, women engineers recognise the critical role that innovation plays in shaping our societies and driving sustainable development.
”On this occasion, we affirm our commitment to fostering a culture of creativity and innovation within our organisation and the broader engineering community.
”Together, let us step out, innovate, and inspire the next generation of women engineers to reach even greater heights of achievement and impact.
”We believe that by stepping out of our comfort zones and embracing new ideas, technologies, and approaches, we can unlock innovative solutions to the complex challenges facing our world today,” she said.
According to her, the theme: ‘step out and innovate’, serves as a call to action for women engineers everywhere to break barriers, challenge conventions.
She noted that it would also pioneer groundbreaking solutions that would propel them toward a brighter and more sustainable future.
Owolabi disclosed that in celebration of the World Creativity Day, APWEN Lagos had inaugurated an artificial intelligence club tailored for female engineering students and young engineers.
She said that the proactive initiative aimed to inspire and equip young engineers with cutting-edge technological insights.
Th chairman said, “Additionally, we already have a 200-capacity hall to set up a resource, technology, and innovation hub to empower women and girls in engineering.
”This endeavour serves as a catalyst for encouraging aspiring female engineers to embrace innovation and stay abreast of emerging trends in the field.
”APWEN Lagos stands united in its dedication to promoting diversity, inclusivity, and excellence in engineering.
“We encourage all female engineers to seize this opportunity to unleash their creativity, explore new frontiers, and make an indelible mark on the world.”
A pan-Igbo group, Ndigbo Unity Forum (NUF), has commended the Chairman of the Dangote Group, Alhaji Aliko Dangote, and his management for reducing the price of diesel from N1,600 to N,1000 per litre.
The Tide’s source reports that diesel is the major fuel used by heavy duty vehicles and generating sets to transport goods as well as run industries across the country.
The President of NUF, Mr Augustine Chukwudum, told The Tide’s source in Enugu, yesterday, that Dangote’s timely response to suffering masses of Nigerians, going through hell to get a meal a day, “is highly commendable”.
According to Chukwudum, Nigerians need to appreciate the patriotism of Dangote since what he has done will go a long way in reducing prices of goods, especially food stuff which has gone out of the reach of the poor.
He called on Nigerians, who wish and pray always for the betterment of the country, to appreciate and thank God for answering their prayer through Dangote’s move.
“It is clear that if Dangote Refinery starts fully and gets all the crude oil needed from Nigeria, the prices of petrol, kerosene and diesel will further reduce.
“We commend President Bola Tinubu for being a listening President and supporting the Dangote Group on our crude oil needs.
“We appeal to Tinubu to encourage Dangote by providing the company with crude oil at a reduced rate as we have been demanding,” he said.
Chukwudum said that this move and subsequent further reduction, would bring industries in comatose back to life, jobs created for unemployed youths and reduction in crime as well.
“We call on governors of oil-producing Anambra, Imo and Abia States to bring investors, who shall build refineries in each of the states to refine thousands of barrels of crude in commercial quantities,” he said.
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