By David Agba
Abuja
The Federal Government yesterday announced a multi-pronged strategic response to mitigate the adverse effects of the decline in the price of crude oil in the global market, even as it proposed a new $73 per barrel of crude for 2015 budget.
Addressing the media in Abuja, 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.
“As part of the response, the Medium Term Expenditure Framework (MTEF) and the Budget 2015 proposal to the National Assembly have also been revised. Government is now proposing a benchmark of $73 dollars per barrel to the National Assembly compared to the earlier proposed benchmark of $78,” she added.
She 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.
“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 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.
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.