The federal government plan to raise about N450billion through internally generated revenue (IGR) for the 2015 budget would not be sufficient going by the continuing fall in the price of crude oil at the international market experts have said.
The government’s 2015 budget proposal was sent to the National Assembly on December 17, 2014 on the benchmark of $ 65 per barrel of crude oil. As at yesterday, crude oil sold at $ 47 per barrel. Government’s actual receipts have grown from about N182 billion in 2011 to N274 billion in 2013 and then, N328 billion as of October 2014.
The minister of finance and coordinating minister of the economy, Dr. Ngozi Okonjo-Iweala recently admitted that there are still leakages and incidences of non-remittance of requisite funds to treasury by some agencies. She said government is going to improve tax revenues not by increasing tax rates as many have advised, but by strengthening its tax administration.
The 2015 budget has an aggregate budget revenue of N3.602 trillion made up of: oil revenue of N1.918 trillion and non-oil revenues of N1.684 trillion (implying a ratio of 53 per cent oil revenues to 47 per cent non-oil) to fund an aggregate budget expenditure of N4.46 trillion proposed for 2015 Budget.
This expenditure figure is made up of N412bn for statutory transfers, N943bn for debt service, N2.616bn for recurrent (Non-debt) and N634bn for capital expenditure. The budget envisages a net federally collectible revenue of N6.9 trillion. Of this, a total of N3.6 trillion is envisaged to fund the federal government’s 2015 budget, representing about 3.4 per cent drop from N3.7 trillion for 2014 budget.
According to the 2015 budget proposal, government plans to contribute an extra N160 billion in tax receipts by ramping up an initiative by the Federal Inland Revenue Service and McKinsey. It plans to limit the issuance of tax waivers which has been fraudulently abused resulting. This will unlock about N36bn in additional tax revenues in 2015.
Okonjo-Iweala noted that about 30 percent of those that received tax waivers from government especially under the pioneer status scheme now abuse the system. The federal government also plans to impose a 10 per cent import surcharge on new private jets which will yield about N3.7bn; 39 per cent import surcharge on luxury yachts which could yield about N1.6bn; and five per cent import surcharge on luxury cars which could yield about N2.6bn of additional revenues.
Government also plans to impose a surcharge on business and first class tickets on airlines. It will also impose three per cent luxury surcharge on champagnes, wines and spirits to generate about N2.3 billion in 2015; and a one per cent FCT Mansion Tax on residential properties with value of N300 million and above which should yield additional N360 million for FCT. These surcharges would yield a total of about N10.56 billion in 2015.
A renowned economist Dr. Boniface Chizea, MD/CEO of BIC Consultancy Services said the federal government should intensify more efforts on internally generated revenue so that we can earn more foreign exchange from other areas apart from crude oil. He said government should begin to exploit other mineral resources such as gold among other solid minerals and also put them on the international market to generate more revenue.
The management consultant and banker urged that government should look inward to see where they can cut unnecessary expenses starting with reducing bill on domestic budget in the presidency, adding that government should also cut unnecessary foreign trips.
The director general of Lagos Chamber of Commerce and Industry (LCCI), Mr. Muda Yusuf said that government should look at on how it can further cut down the recurrent expenditure for the 2015 budget which is about N2.616 trillion.
He pointed out that government should remove budgetary provision for petroleum subsidy which is no longer necessary because the cost of import of petroleum product has dropped drastically due to fall in global oil price. “The removal of budgetary provision for petroleum subsidy will give a saving of N290 billion which can be used to bridge some of the gaps,” Muda said.
Okonjo-Iweala had informed the national assembly lawmakers that “The discipline these new measures impose will go a long way to support the economy and provide Nigeria a responsible pathway to overcoming the limitations of falling oil revenues without disproportionately affecting the poor-to-middle class.” She also said government is also going to cut down on non-essential and non-developmental expenditures from the budget.
The former World Bank managing director said they are instituting measures aimed at improving spending by saving about N82.5bn by cutting international travels and training by 50 per cent for all MDAs thus saving about N14bn. Other provisions for overhead expenditure have been dropped completely saving about N4bn, she said.