Low oil price: FG determined to stabilise economy



The Federal Government has restated its determination to maintain growth and stabilise the economy in 2015 despite the  decline in  its revenues.

Minister of State for Finance, Ambassador  Bashir Yuguda, who made this known in an end of year interaction with newsmen in Abuja stressed that government would not waver in its resolve to further diversify the economy.

Yuguda described 2014 as a challenging year but maintained that the country managed to sustain a stable economic growth and re-established itself as Africa’s largest economy with an impressive diversification trajectory.

According to the  Minister,  the planned take off of the Development Bank of Nigeria early this year was in line with the bid to sustain growth as it would greatly enhance and improve medium to long term financing for Nigerian businesses, going forward.

Crude oil price yesterday fell below the 2015 budget benchmark of $65 per barrel, a trend analysts reason, if sustained for long, might affect government’s  spending in the year.

But Yuguda  emphasised  that government’s scenario-based approach to the regime of oil price shocks is structured to proactively respond to such situations.

“We recognise that prices might slide further, but we do not intend to revise the benchmark further down. We are aware that price intelligence indicates that prices might average between $65 and $70pb in 2015. This is anchored on the fact that American shale oil, which is largely driving these price shocks also runs the risk of becoming unsustainable as it is produced at a high cost of at least $65 per  barrel,” the Minister, said, stressing  that government was prepared to introduce further measures if prices fall outside this range.

He noted that 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’s impressive performance by about N160 billion.

On the proposed Wholesale Development Banking institution, the Minister noted that it would utilise an on-lending model and channel financing through existing commercial banks as well as restructured “specialised” banks such as the Bank of Industry (BoI) and the Bank of Agriculture (BoA) to fund businesses that will deepen growth and generate more jobs.

He said partners that have committed to invest in the bank include the World Bank, the African Development Bank (AfDB), the BNDES Bank in Brazil and KfW in Germany. The World Bank and AfDB  have pledged $500 million apiece for the take off of the bank. Yuguda added that the EU had also indicated interest in investing in the bank through the union’s development financing outfit, the European Investment Bank (EIB), although negotiations were yet to be concluded.

“On our part, the government has set aside the sum of N4 billion in addition to another N16 billion provision in the 2014 Budget for the take off of the project. Our existing BoA and BoI will be re-structured as specialised institutions to retail financing from this new Wholesale Development Bank.

“Additionally, the government is working on a system of tax incentives for Micro-Finance Banks to promote financial inclusion for the poor,” he said.

EIB’s manifest interest followed a series of meetings held in Brussels, Lagos and Abuja between a government delegation led by Yuguda and EIB officials.

Recall that the Federal Government had deployed two high level teams led by the Coordinating Minister of the Economy/Minister of Finance, Dr. Ngozi Okonjo-Iweala and Yuguda to different global financial blocs for the road show. The Minister of State for Finance who recently led his team to Europe and some parts of Asia and the Middle East noted that the bid has raised significant interest among the global funding agencies.

Describing the transformation agenda as far reaching, the Minister noted that 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.

Maintaining that government has made progress in this regard, Yuguda affirmed that it was evident in the rebased 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.”

Source : SunOnline

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