FG introduces austerity measures as drop in oil price in int'l market poses threat to Nigerian economy

Following the continued drop in oil price in
international market, the Federal government
yesterday announced the introduction of some
austerity measures such as tax introduction on
luxury goods such as champagne, jets, amongst
other, to be implemented to reduce the effect
of the continued oil price decline on the
Nigerian economy as Nigeria is largely an oil
dependent economy.
Addressing newsmen in Abuja yesterday
November 16th, Minister of Finance and
Coordinating Minister of the Economy, Dr Ngozi
Okonjo Iweala, said as part of measures to
cushion the hardship that is to come due to the
continued drop of oil price in the international
market, government would henceforth collect
“tax on luxurious goods,” and that this was part
of measures aimed at increasing revenue from
non-oil sectors.
"We all know the definition of luxury
goods, we are still compiling the lists and
one of the things we can tax is
champagne, alcoholic beverages, jets,
luxury cars- we will look at the engine
capacity, and yachts. We are putting the
list together but we intend to do a
surcharge going forward on these items.
The principle is that those who are better
off in the society and I hope they won’t
mind will be willing to share a bit more in
remitting a little bit more to the treasury
than what they normally do on these
things.” she said
She revealed that another austerity measure
being put in place by the government is the
reduction of international travel within the
public service
“We are not talking about (cutting) salaries
and benefits. We are talking of trainings
and travels and these will be only for
critical and essential items which will be
pre-approved by the Head of Service and
the Director-General of the Budget Office
and then if someone invites you for
overseas course, you can go provided they
pay for your training and your stay and
you have to furnish evidence that they are
paying before you will be allowed. The
purpose of this is to tell you what we are
doing and this team is calm and will be
effective and we are working with the
monetary policy authorities and together
we will manage the economy in a
transparent manner so that people need
not have any fear.” she said
The Minister said that after studying the trend
in the drop of oil price in the international
market, the economic team approved a $5 per
barrel reduction in the 2015 budget benchmark
price for oil from $78 to $73 per barrel.
“As part of the response, the Medium
Term Expenditure Framework and the
Budget 2015 proposal to the National
Assembly have 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. 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".
On the advise from some scholars to print
more Naira notes so as to reduce the effect of
the oil price drop on Nigerians, the Minister
said such an action if implemented would be
disastrous to the nation as it would increase
the inflation rate of the economy
"Printing money without adequate revenue
support will lead to serious consequences
for the country. It will spur inflation as the
experiences of Germany in the early part
of the last century and more recently,
Argentina and Zimbabwe demonstrate.
This prescription will victimise the poor
and the middle class that it is supposedly
protecting.” she said
She said one of the best ways of managing the
situation was to create more jobs. She
announced that President Jonathan would
today November 17th launch the 4th edition of
the You Win youth empowerment programme.
“To show how serious government is about
job creation, President Jonathan will
tomorrow, (Monday) November 17 launch
the 4th edition of YouWin to support
another 1,500 entrepreneurs along with a
private equity fund for entrepreneurs.
That is an expression of government’s
commitment and seriousness to job
creation.”
Dr Okonjo-Iweala said the reduction in price of
the oil prices in the international market may
continue but that government would do
everything possible to make sure Nigeria is not
adversely affected.
She said from the $4.1bn (N656bn) in the
Excess Crude Account, the government would
be withdrawing $2bn (N320bn) between now
and the end of this year to take care of critical
expenditure.
“We will work in such a way that we won’t
deplete the ECA because we have to leave
something for next year but we might go
to tap about a half of it ($2bn) or slightly
less than half to be able to meet
expenditures that are crystalizing at the
moment that we need to make.” she said
She also stated that infrastructural expenditure
would still continue as the economy can only
improve when infrastructural development is in
place.
Source: Punch