FG slashes petroleum subsidy by N771bn as product landing costs slide

The Nigerian government has slashed the amount that it would pay for petroleum subsidies in 2015 by N771 billion to N200 billion, with the hope that landing costs of oil products would continue to drop as oil prices drop.

The N200 billion which is against N971 billion paid in the current 2014 fiscal year, is contained in the 2015 budget proposal awaiting appropriation before the National Assembly.

Government is also proposing to draw down about half a billion dollars (N80 billion) from the Excess Crude Account (ECA) and borrow N570 billion to finance the 2015 fiscal deficit put at 0.79 percent, which is however down from 1.24 percent this year.

This comes as

Ngozi-Okonjo-Iweala, the co-ordinating minister for the economy and minister of finance, publicly advised Nigerians to prepare for what she calls “a very difficult time” as government struggles to keep up the economy amidst prevailing revenue challenges.

BusinessDay checks show that the implementation of the 2014 budget is already hit by the revenue crisis- while recurrent budget is on track, capital component has been hard hit.

For instance, of the over N1 trillion capital budget for 2014, only N610 billion has so far been released for the first third quarters of the year. Most of the releases, BusinessDay learnt, are already fully cash-backed and being utilised, while the fourth quarter is still being awaited.

Out of the N268.37 billion provisioned for the Subsidy Re-Investment Programme (SURE-P), N208.3 billion or 77 percent has been utilised in various job creation activities and infrastructure projects.

This level of implementation is coming amidst various challenges to the 2014 budget revenue, including quantity and price shocks, as well as deliberate under-remittance of Internally Generated Revenue by some Ministries, Departments and Agencies (MDAs) of government.

There have also been some expenditure pressure points from wage bills, rising pension claims and duplicative roles of some agencies.

But the 2015 budget is tagged ‘a transition budget’ and according to Bright Okogu, director-general, Budget Office, entails managing the present revenue challenge in a manner that protects the most vulnerable, while safely transiting to a broader based non-oil driven economy.

Okogu said that apart from those outlined strategies of improving revenues through better tax policies, and proposed levies on luxury items, as earlier explained by the finance minister, government expenditure has been tightened in the 2015 budget.

The budget proposes to freeze the purchase of new equipment and other administrative capital that would hopefully generate some savings, for instance freezing the purchase of office buildings is anticipated to bring in about N1.99 billion; construction/provision of office buildings, N24.05 billion; while office furniture and office furniture and fittings which is expected to save some N9.50 billion.

Okongu hinted that in 2015, International travels and training would be limited to only the most crucial for now and would apply to all public servants so that MDAs can remit more IGR to the treasury. This is expected to save up to N14.02 billion.

Meanwhile, some expired committees and commissions which are still existing and add to leakages to the system would be rationalised, freeing up about N6.49 billion.

He further disclosed that there would besome cuts in capital expenditure, while focus would be on growth-promoting sectors.

Some of the figures seen by BusinessDay show that capital spending for defence and security has been allocated N985.79 billion. Infrastructure, including works, power, transport, aviation and Federal Capital Territory has been allocated N93.66 billion.

Businessday