Minister of State for Finance, Budget, and National Planning, Clement Agba made the disclosure while speaking at an interactive session with the House of Representatives joint committees on Finance, Appropriation, Budget, and Economic Development as well as Loans, Debt Management. Representing the Minister for Finance, Budget and National Planning, Zainab Ahmed at the session attributed the possible slide to the challenges of COVID-19.
He said that the country was exposed to spikes in risk aversion in the global capital markets, fearing it will put pressure on the foreign exchange market as foreign portfolio investors exit the Nigerian market. He said that crude all prices dropped sharply in the mild market with Bonny Light crude oil price dropping from a peak of US$72 pb on January 7, 2020, to below US$20 in April 2020 as a result of which the US$57 crude oil price benchmark on which the 2020 budget predicated.
Agba said that the bid to arrest the situation made the review for the projections for Customs duty, Stamp Duty, Value Added Tax, and Company Income Tax revenues necessary. He said further that over the past 5 years, actual revenue performance averaged 61.4%, adding that some government reforms had performed adding that “we believe we can do more to improve revenues, especially remittances from Government Owned Enterprises, possibly up to N1 trillion p.a.”
He stressed that the “oil GDP growth rate has a strong positive correlation with real GDP growth in Nigeria. Consequently, changes in the underlying drivers of oil GDP will significantly affect real GDP performance.” He said further that although Nigeria‘s total production capacity stands at about 2.5 mbpd, current crude production stands at about 1.4mbpd in compliance with the OPEC production quota), and an additional 300,000bpd of condensates, totaling about 1.7mbpd. According to him, the World Bank has projected that crude oil prices will rise gradually from an average of US$42 pb in 2021 to $44.5 pb in 2022, and US$47 pb in 2023, while EIA expects Brent crude oil prices to average $41 pb during the secoBuhari f of 2020 and $50 pb during 2021, reaching $53 pb by the end of 2021. He said that the 2021-2020 MTEF/FSP will however enhance revenue generation. He said: “We have included in the 2021 – 23 MTEF/FSP, a Tax Expenditure Statement (TES) overview which seeks to dimension the cost of tax waivers/concessions and evaluate their policy effectiveness. “To enhance Independent Revenue generation and collection, the Government will aim to optimize the potentials operational and collection efﬁciency of GOEs with a view to generating signiﬁcantly higher revenues required to fund the FGN budget. “Current revenue performance of GOEs will be addressed through the effective implementation of the enhanced Performance Management Framework. The key elements of the reform initiative include Performance Contracts for Chief Executive Ofﬁcers (CEOs) and key management staff, which will set ﬁnancial indicators and targets for each GOE “The cost-to-revenue ratio of GOEs has by a Presidential directive been limited to a maximum of 60%-70% while regular monitoring and reporting of revenue and expenditure performance of GOEs will be undertaken by both the get Office of the Federation and the Ofﬁce of the Accountant General of the Federation. “We shall also work closely with the National Assembly to amend relevant laws that need to be amended to help with the SRGL. ”We have revised the 2020 FGN budget and will accelerate implementation to maintain budget credibility, enhance GDP growth, and promote social inclusion. The draft 2021 — 2023 MTEF/FSP has been prepared against the backdrop of a global recession and heightened global economic uncertainty. “The draft 2021-2023 Medium Term Fiscal Framework shows that there are continuing global challenges due to the COVlD-19 pandemic. The medium-term outlook for Nigeria suggests that ﬁscal risks are somewhat elevated, largely due to Covid-19 related disruptions which have exacerbated structural weaknesses in the economy. “In furtherance of our objective of greater comprehensiveness and transparency in the budget process, the FGN 2021 Budget will reﬂect the revenues & expenditures of all [about 60) signiﬁcant GOEs (excl. NNPC), not just 10 as in the 2020 budget. “Weaker-than-expected economic performance threatens our ambitious revenue growth targets, as seen in the 2020 revised budget and the updated medium-term projections. Achieving ﬁscal sustainability and macro-ﬁscal objectives of government will require bold, decisive, and urgent action. The government is determined to act as may be required.”