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
0 comments: