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.
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