As 2015 rolls in less than 96 hours from now, Nigerians may face one of the most difficult and hardest years in recent times.
Apart from fears on what could arise from the 2015 general elections especially the presidential polls where the main opposition All Progressives Congress (APC) has threatened to form a parallel government to the Peoples Democratic Party (PDP) Administration, if the polls were rigged, the economic outlook does not give much cause for cheer.
Reason: the downward slide of crude oil price in the international market is expected to hit Nigeria harder next year, unless things improve. Crude oil accounts for more than 70 per cent of the country’s foreign revenue.
The prevailing free fall of crude oil price, refusal of US (Nigeria’s major oil importer) to patronise the country and discovery of oil by many countries as well as alternative energy sources are already hurting Nigeria’s finances. This accounts for why many states owe their workers two to six-month salary arrears.
Recently, the term ‘austerity measures’ crept back into Nigeria’s lexicon on account of the brewing hardship. The last time austerity measures dominated the air waves was in the early 80s when Nigeria’s Naira lost value in quantum leaps against the US Dollar and other leading world currencies.
To worsen the situation, most of the governments at all levels will spend less than what they spent last year, Saturday Vanguard’schecks have shown.
So far, only 21 of the 36 states of the country have unveiled their 2015 budget proposals.
States like Sokoto, Oyo, Cross River, Bayelsa, Niger, Delta, Plateau, Bauchi, Osun, Ekiti, Edo and Akwa Ibom (see table) will spend less than what they spent last year.
Among the states only Lagos State has proposed to spend N489.69 billion, the exact sum it spent last year.
States that proposed to spend more in 2015, though marginally, are Ogun, Taraba, Kwara, Anambra, Katsina, Kaduna, Enugu and Adamawa.
While presenting the budgets, the governors cited dwindling collectible revenue from the Federation Account as the main reason for scaling down the budgets. They promised to improve on their Internally Generated Revenue (IGR) to augment the budgets. And they hope to boost their IGR through taxation among other sources, which will boil down to the citizenry and businesses paying more.
To the credit of the states, most of them have allocated more funds to capital expenditure. Only Ekiti (60.32 per cent), Ogun (56.2 per cent), Niger (52.17 per cent) and Oyo (61.17 per cent) allocated more funds to recurrent expenditure.
And given the pedigree of recurring poor budget implementation which is hardly up to 70 per cent of the total budget, Nigerians may be in for tough times in 2015. With dwindling revenues, increased taxes (individuals and companies), a lot will be required for companies to remain afloat, avoid sacking workers and paying salaries as of when due.
Capital expenditure: FG allocates 14.6%
At the federal level, the government has proposed to spend N4.358 trillion next year as against the N4.962 expended in 2014. Presenting the budget to the National Assembly on behalf of President Goodluck Jonathan, the Finance and Co-ordinating Minister of the Economy, Dr Ngozi Okonjo-Iweala, said the budget has an aggregate revenue target of N3.602 trillion made up of oil revenue (N1.918 trillion) and non-oil revenues (N1.684 trillion).
This expenditure figure is made up of N412 billion for Statutory Transfers, N943 billion for Debt Service, N2,616 billion for Recurrent (Non-Debt) and N634 billion for Capital Expenditure (inclusive of SURE-P). In other words, only N634 billion will be spent on infrastructure and provision of direly needed amenities.
To fund the budget, Okonjo-Iweala said IGR “actual receipts have continued to grow from about N182 billion in 2011 to N274 billion in 2013 and then, N328 billion as of October 2014” and decried leakages and non-remittance of funds to the treasury by some agencies.
She said President Jonathan has “subsequently issued an unequivocal directive to all revenue agencies to ensure remittance of their obligations to treasury and all relevant government bodies are now working with banks to ensure strict compliance, and so we have projected IGR receipts of N450 billion for 2015”.
She continued: “In 2015, the federal government will be ramping up the Federal Inland Revenue Service (FIRS)/McKinsey initiative to contribute an extra N160 billion in tax receipts and an aggregate of about N460 billion over and above the 2014 levels in the 2015-2017 period.”
On taxation, the minister hinted of a possible but gradual increase in Value Added Tax (VAT) as a long term measure. In the medium term, she said focus will be on tax policy to see where opportunities lie to streamline and rationalize certain taxes and levies while looking to boost others.
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