Declining revenue: FG’ll sustain growth –Yuguda

…to set up new development finance bank
The Federal Government has restated its determination to maintain growth and stabilise the economy in 2015, despite the current declining revenues from crude oil exports.

Minister of State for Finance, Mr. Bashir Yuguda, who made this known during an end of the year interactive session with journalists in Abuja, stressed that the government would not waver in its resolve to further diversify the economy, significantly boost non-oil revenues, plug loopholes and cut unnecessary expenditures.
He described 2014 as a challenging year while noting that despite the fiscal constraints, the country managed to maintain a stable economic growth and re-established itself as Africa’s largest economy with an impressive diversification trajectory.
According to him, the planned take off of the Development Bank of Nigeria early this year is in furtherance of government’s drive to sustain growth as the bank, when it commences operations “would greatly enhance and improve medium to long term financing for Nigerian businesses, going forward.”
He noted that the government initiated “the Capacity Enhancement Programme, CEP, of the Federal Inland Revenue Service, FIRS, to improve non-oil tax revenue”, adding that the agency is expected to meet its target of surpassing 2014 impressive performance by about N160bn.
On the planned wholesale development funding institution, the minister noted that it would utilise an on-lending model and channel financing through existing commercial banks as well as restructured “specialised” banks such as the Bank of Industry and the Bank of Agriculture to fund businesses that will deepen growth and generate more jobs.
He noted that the partners that have committed to invest in the bank include the World Bank, the Africa Development Bank, the BNDES Bank in Brazil, and KfW in Germany.
The World Bank and AfDB have pledged $500m apiece for the take off of the bank.
Yuguda added that the EU had also indicated interest in investing in the bank, through the Union’s development financing outfit, the European Investment Bank, EIB, although negotiations were yet to be concluded.
The minister said: “On our part, the government has set aside the sum of N4bn in addition to another N16bn provision in the 2014 budget for the take off of the project. Our existing Bank of Agriculture and Bank of Industry will be re-structured as specialised institutions to retail financing from this new wholesale development bank.
“Additionally, the government is working on a system of tax incentives for micro-finance banks in order to promote financial inclusion for the poor.”
EIB’s manifest interest followed series of meetings held in Brussels, Lagos and Abuja between a government delegation led by Yuguda and EIB officials.
It will be recalled that the Federal Government had deployed two high level teams led by the Coordinating Minister of the Economy/Minister of Finance Dr Ngozi Okonjo Oweala and Ambassador Yuguda to different global financial blocs for the road show.
Yuguda, who recently led his team to Europe and some parts of Asia and the Middle East, noted that the bid has raised significant interest among the global funding agencies.
Crude oil price yesterday slid further, clearly below the 2015 budget benchmark of $65 per barrel, a trend analysts reason, if sustained for long, might affect government spending in the year.
While reacting to the falling oil prices, he emphasised that the government’s scenario-based approach to the regime of oil price shocks was structured to proactively respond to such situations.
He said: “We recognise that prices might slide further, but we do not intend to revise the benchmark further down. We are aware that price intelligence indicates that prices might average between $65 and $70pb in 2015.
“This is anchored on the fact that American shale oil, which is largely driving this price shocks also runs the risk of becoming unsustainable as it is produced at a high cost of at least $65 per barrel,” the minister added.
He, however, stressed that the government was prepared to introduce further measures “if prices fall outside this range.”
Describing the transformation agenda of the Jonathan administration as far reaching, Yuguda noted that government had taken policy decisions to correct the identified structural imbalances in the economy and the concentration of government’s external revenue on crude oil sales.
Listing agriculture, services, construction, hospitality and other non-oil sectors as amongst the key sectors government had recorded major achievements based on the rebased GDP indices, the minister explained that despite the current fiscal challenges, critical projects will not be affected by the announced fiscal restructuring measures since they are “key to economic growth and development as well as job creation.”
He reiterated that the areas that would be affected by the fiscal adjustments are those that would have least negative impact on the generality of Nigerians.
These include, widening the tax net and pushing for higher levels of compliance; introduction of a new tax on luxury products as well as reducing expenditure by cutting foreign travels by government officials to the barest minimum, amongst others.