Home BUSINESS BANKING & FINANCE Fall In Oil Price: Nigeria Makes Budget Cut Of 20% On Capital...

Fall In Oil Price: Nigeria Makes Budget Cut Of 20% On Capital Expenditure, Others

President Muhammadu Buhari has directed the ministry of finance to cut down the capital expenditure budgeted by 20 percent across Ministries, Departments and Agencies (MDAs).

The President also approved a 25 percent cut on all government owned enterprises, including the ones that are in the 2020 national budget and the ones that are not included in the budget.

The minister of Finance, Budget and National planning, Hajiya Zainab Shamsunna Ahmed, who briefed news men today, March 18, shortly after the meeting of the Federal Executive Council (FEC), presided over by President Buhari, said that  by this measure, “we expect that the operating surpluses that will accrue to the federation will increase because when their operational expenditure reduces, the operating surpluses that they remit to the treasury will also increase significantly.”

She said that the other policy matters that have been discussed for implementation is for the administration to stop recruitment, except for essential services, such as security and health services and to also restore and comply by the Civil Service Retirement Regulations.

“We have been asked also to review the modalities for the implementation of the social investment programme and finally to review the non-essential tax waivers that we are implementing right now to cut down on our tax expenditure so that we can realize more revenue.

“These measures mean that we are going to re-engage with the National Assembly and we will be doing that shortly, may be from today or tomorrow, to revise the EMTEF  as well as to revise the 2020 Budget.”

Zainab Ahmed said that the ministries had earlier presented the fourth quarter GDP report to the Council, adding that as at 2019 Q4, the GDP was 2.55% and full year was 2.27%, but that since then, because of the start of the COVID-19 pandemic, which caused a run on the crude oil price, “we had to step back and make an assessment of the impact of this pandemic as well as the impact of the crude oil price decline on the Nigerian economy.

“We have: myself, the Minister of State for Petroleum Resources and the CBN Governor, have had cause to brief this group twice on the assignment that was given to us by His Excellency the President.

“I’m pleased to report that just yesterday, His Excellency has approved a number of measures for us to implement. These measures include the introduction of PMS price modulation mechanism. “The reason being that at the low crude oil price of $30 to $32 per barrel, there’s no under-recovery. The under-recovery is right now zero. In fact, we are at an over-recovery  stage, meaning the PMS price will be reduced to reflect the reduced price of the crude oil in the international market.

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“Mr. President also approved that we should cut down on the size of the federally funded upstream projects of the petroleum sector. The reason being that we want to be able to get more revenue, by less reduction from NNPC. The reduction of the crude oil price from the $57 per barrel that we budgeted to $30 means that we are going to get so much less revenue, almost 45% less than we planned and because of that, we have to amend a lot of projections in the budget as well as in EMTEF to reflect our current realities.

“The President also agreed that we should do a scenario to reflect what the actual position will be with a $30 crude oil price, that is we were to anticipate what will be the worst case scenario and we have worked on that scenario and this scenario necessitates that quite a number of expenditures needed to be cut down, even as we review how we can enhance revenues that are not directly affected by the crude oil price decline.

“So we are looking at enhancing production to make sure that at the minimum the 2.18 million barrels that is in the budget as production volume is realised and NNPC has directives to that effect.

“We also need to adjust Customs revenue, which has been budgeted for at N1.5 trillion, but we are adjusting it downwards because we anticipate that trade volumes will reduce and once trade volumes reduce, Customs revenue will be significantly impacted as a result.

“We also have approvals to reduce the projected revenue from privatisation proceeds by as much as 50% because, again, with the slow down in economic activities, we are anticipating that the sale of independent power plants might not be fully realized as planned for in the budget.”

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