The Minister of Finance and the Co-ordinating Minister for the Economy,Dr Ngozi Okonjo-Iweala,announced this while addressing journalists on the Federal Government’s response to the crisis in Abuja on Sunday.
The measures which will see Nigerians paying tax on luxury goods,comes barely six days after President Goodluck Jonathan formally announced his intention to contest the February 14, 2015 election.
The other measures, according to her, are a reduction in public expenditures and international travels by public servants.
The minister stressed that even though the drop in oil prices was a serious challenge, it was also an opportunity for the country to refocus efforts towards the non-oil sectors in preparation for a future with less oil revenue.
As part of the efforts to reduce expenditure, she said international travel within the public service would be severely curtailed, adding however, that critical infrastructure projects would not be affected because they were key to economic growth, development and job creation.
“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 also talked about the report of the Steven Oronsanye committee, which was set up by government to prune down ministries and agencies.The committee had recommended that some of the agencies should be merged.
“We found that a lot of these agencies are underpinned by law and we discussed with the National Assembly and they are willing to look at how their laws can be repealed. So this is also part of our medium term measures,” she said.
Giving details of the government’s responses to the oil price fall, the minister said that after a careful analysis of the situation, the economic team approved a $5 per barrel reduction in the 2015 budget benchmark price for oil from $78 to $73 per barrel.
She said, “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
“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 had 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, which has been working with Mckinsey to increase receipts will be revised upwards for next year.
Se said the country had recorded good success in reaching the initial target set this year of N75bn; noting that so far N65bn of this had been collected.
For 2015, the minister put the revised target at N160bn above the 2014 base.
Okonjo-Iweala also unveiled plans by the government to introduce what she called “tax on luxurious goods,” stating that this was a part of measures aimed at increasing revenue from non-oil sources.
She said that users of luxurious items, such as private jets, yachts, alcoholic beverages and expensive cars, would be required to pay special taxes for such goods.
The minister, who said the government was still compiling the list of luxurious goods to be taxed under the new initiative, assured that the proceeds from these items and services would be used to support the economy from external shocks.
She said, “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.”
Okonjo-Iweala noted that the reduction in the price of oil might continue but gave assurance that the government was fully prepared to ensure that the economy was not worse-off.
To this end, 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.
She said, “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 crystalising at the moment that we need to make.”
On calls from some quarters that the Federal Government should respond to the decline in revenues by printing more naira to fund projects, the minister said that such recommendations would be disastrous for the country if implemented.
Okonjo-Iweala , who argued that such prescriptions ignored the elementary principles of economics, said “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 explained that the best way to protect the interest of the ordinary people was to control inflation as much as possible, expand the economic base, strengthen the sectors that drive growth, boost critical infrastructure and create more jobs.
The minister added, “We have already started doing that, the results are already coming but we still have a lot of work to do.
“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.”
The implementation of the new mortgage system, including the current processing of over 66,000 applicants for mortgages, according to her, will go on as planned.
This, she added, would help to ensure that the country reaps the strong benefits that will come from unleashing the housing revolution which is attracting serious interest from local and international investors.
Also, unaffected are public sector wages as well as key initiatives in education, health and other areas critical to the country’s human development.
Meanwhile, financial experts have said that Nigerians should be ready for a harsh economy in the nearest future as a result of the continued fall in the prices of oil.
Punch
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