Budget Minister continues consultations, explains projections for MTEF and FSP for 2018-2020
The Minister of Budget and National Planning, Senator Udoma Udo Udoma at the weekend took the 2018-2020 MTEF and FSP consultations exercise to Lagos where he met with civil society organizations (CSOs), private sector operators (PSO) and the general public.
The Minister presented draft proposals for the Medium Term Fiscal Framework/Fiscal Strategy Paper (MTFF/FSP) 2018-2020 and asked for suggestions and inputs which could be considered for inclusion in the final Medium Term Expenditure Framework (MTEF), which would serve as the basis for the 2018 Budget.
He pointed out that the proposals he was presenting for the consideration of the general public were drawn from the Economic Recovery and Growth Plan (2017-2020) which is the blueprint guiding all the economic plans of the Government.
He reminded them that the ERGP was itself the product of extensive consultations with a broad spectrum of Nigerians, including development experts, top economists and other critical stakeholders. He went on to say that all budgets prepared within the Plan period must be drawn from, and align with, the provisions of the ERGP.
During the interactions, he explained the basis for the key assumptions and macroeconomic framework contained in the proposed MTEF, particularly projections for oil production levels, crude oil price benchmark, exchange rate, inflation rate and GDP growth rate among others. These were all being exposed for consideration and discussion purposes. Accordingly, he welcomed comments and suggestions on them.
He said the consultations which started penultimate Thursday with the Governors, and continued on Tuesday with the National Assembly and then Thursday with CSOs, PSO, the media and general public in Abuja, is for the purpose of seeking public input into the preparation of the MTEF, and is as recommended by the provisions of the Fiscal Responsibility Act.
The Minister explained that though government's plan, as set out in the ERGP, is to diversify the economy as soon as possible away from reliance on crude oil proceeds, we need the revenues from crude oil to fund the necessary infrastructure investments that are required to provide the enabling environment for the diversification of the economy into agriculture, manufacturing, construction and services. "You have to use what you have to get what you want", he stressed.
He also explained that government is aware of the diminishing long term prospects of crude oil, which is why it is important that we maximize the use and exploitation of our petroleum resources now. This was also why Government was determined to move away from exporting raw crude oil but instead to encourage local refining and processing, as well as the local production of the various derivatives from crude oil for which there will continue to be domestic and international demand.
Senator Udoma said the production level of 2.3 million barrels a day projected for 2018 is realizable as we have the technical capacity to produce much more than that. From available statistics from the NNPC, he confirmed that, with the inclusion of our current condensates production of 400,000 to 450,000 barrels a day, "we have been able to produce more than 2 million barrels a day at some periods this year.
"However, average production for the year is still about 1,900,000 barrels a day but with the increasing production we should be able to average more than 2 million barrels by the end of the year." To sustain high production levels, the Minister said government will continue to intensify efforts at ensuring peace in the Niger Delta region to ensure minimal disruption.
Addressing concerns raised over the level of borrowing and the continued provision for deficit in the budget, the Minister while appreciating the concerns about the growing debt figures, explained that the issue is not so much of a debt problem, but much more of a revenue problem.
According to him, even with our current levels of borrowings the country’s fiscal deficit is still well within the three per cent (3%) limit prescribed by the Fiscal Responsibility Act, and government is continuously monitoring the deficit level to ensure that it remains within the 3% threshold. "If we have enough revenues coming in, we can easily offset the debts. The problem is that we are not getting as much revenue as we require and therefore have to borrow to make up the shortfall required to fund the necessary infrastructure that will help us make our economy grow. That is why we have had to borrow, but our debt level is sustainable".
"We are working hard to increase our non-oil revenues but these are still insufficient. For instance, our revenue from tax is very low considering the size of our economy; it is about the lowest compared to other countries in Africa. Our tax to GDP ratio is 6% whereas the average in Africa is about 16%. So we need to increase our revenues and government is working hard to increase revenues so as to be able to fund our expenditure without having to rely too heavily on borrowing", he pointed out.
Part of the measures he said government is considering to raise the general level of taxes' collection, is to increase Value Added Tax, and other taxes, on luxury items. For this purpose the Federal Government is consulting the States and the National Assembly. The increase, he emphasized, will not affect general goods and everyday services utilized by the average citizen.
The Minister agreed that it would very challenging to achieve the target GDP Growth rate of 4.8% set out in the ERGP for 2018. However, he emphasized that it could be achieved if we are able to attract a high enough amount of private sector investment to drive economic growth. It was for this reason that Government was putting a lot of effort and emphasis on making it easier for business to be transacted in the country.
"The good news is that there are currently many positive indicators in many sectors of the economy, which shows that we are moving in the right direction and that the strategies set out in the ERGP are the right strategies", he noted.
He emphasized that changing Nigeria in a fundamental way, which is the objective of the Buhari Administration, will require hard work from all concerned. On the part of Government, he gave a commitment that the officials of Government will provide the leadership. He therefore appealed for the cooperation of Nigerians and development partners to ensure that Nigeria's dream for sustained, inclusive and diversified growth is realized.
Media Adviser to the Hon. Minister