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Published On: Wed, Dec 17th, 2014

Oil price fall: FG slashes 2015 capital budget by N.6 trillion

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Okonjo-Iweala_Ngozi (1)By Ikechukwu Okaforadi and Lawrence Olaoye

Indications emerged yesterday that a lot of Federal Government’s ongoing capital projects may remain uncompleted, while new ones may not be awarded next year, following the decision by the government to slash the 2015 capital projects proposed expenditure by N581 billion.

This is even as the 2015 budget estimate by the federal government reduced further by N304 billion, as the international oil price continues on a downward trend, hence the government has pegged the oil benchmark for the next year budget on $65 per barrel. Meanwhile, President Goodluck Jonathan has again shunned the National Assembly in the presentation of the 2015 budget, following his directive that the Minister of Finance, Ngozi Okonjo-Iweala, to lay before both chambers of the National Assembly, the 2015 budget estimate today.

A breakdown of the new Medium Term Expenditure Framework (MTEF) and Fiscal Strategy Paper (FSP) for the 2015 budget indicates that capital expenditure, which was formerly N1.208 billion in the old MTEF submitted in September 20, is reduced to N627 billion in the recently reviewed MTEF, slashing N581 billion.

According to the new MTEF, SURE-P capital expenditure for 2015 came down from N184 billion to N102 billion, while MDAs capital expenditure proposal came down from N872 billion to N380 billion, and capital expenditure in statutory transfer came up from N150 billion to N144 billion in the reviewed MTEF.

The recurrent expenditures virtually remained unchanged, as the same figure of N2.622 trillion is maintained in both the old and reviewed MTEF, while the National Assembly budget of N150 billion remained unchanged.

On the overall budget estimate for 2015, the Federal Government reduced the budget expenditure from N4.661 trillion to N4.357 trillion, leaving a slash of N304 in the current MTEF.

In the same vein, while the oil daily production remains 2.2782 barrels per day, the exchange rate in the new MTEF increased from N162 to N165, while oil benchmark came down from $73 to $65 per barrel.

The Federal Government also reduced subsidy payment on kerosene in 2015 from N193 billion in the old MTEF to N84 billion in the new proposed MTEF.

But, President Jonathan has again given a hint that the current N4.357 trillion 2015 budget proposal, which is based on the new MTEF, may further be reviewed downwards if the oil prices continue to precipitate beyond the current framework.

He urged the lawmakers to give the budget proposal an expeditious passage, to enable the country start early implementation of the budget next year, adding “there is no iron-clad guarantee where oil is concerned due to numerous underlying global geo-political factors that are outside our control and unpredictable.”

However, President Jonathan has declared that his government was prepared for the continuous slide in the price of crude oil at the international market by diversifying and investing into agriculture.

He made the statement at the formal launch of Youth Employment in Agriculture Programme (YEAP) and the Fund for Agricultural Finance in Nigeria (FAFIN) yesterday at the Banquet Hall of the Aso Villa in Abuja.

Jonathan observed that despite the slide in the crude price and the crash of the Naira against the Dollar, prices of foodstuff across the country have been stable and affordable.

This, according to him, was made possible by the production of additional 21 million metric tons of food by the farmers through the launch of the Agricultural Transformation Agenda in 2011.

He said: “Within the same period, we have created 3 million farm jobs. I am confident that we will soon surpass our target of 3.5 million farm jobs. Today, the gap between the farmer and the Government has been substantially bridged – farmers, all over the country, are being touched by the new drive for food production.”

He added that: “The agriculture sector is vital for the economy of Nigeria. The recent decline in the price of crude oil further underscores the necessity to rapidly diversify our economy away from dependency on crude oil. By producing our own food, we will save scarce foreign exchange, reduce dependence on food imports, while reviving our rural areas and creating wealth for our farmers.

“The decline in the price of crude oil did not take us by surprise. For the past three years we had been engaged on a carefully designed and implemented agricultural transformation agenda. Our massive food production efforts, which led to the production of 21 million metric tons of food in the past three years, has created a buffer and mitigated the impact of the devaluation on food prices,” Jonathan said.

The President however noted the need to mechanize farming and engage the youths in the venture so that millionaires and billionaires could emerge from the sector.

He said “That is why we are focusing on programs that will engage our teeming youths in profitable and viable economic activities along the agricultural value chains, including commercial farming, processing, value addition, logistics, transport and marketing of value added agricultural products. They will not just take agriculture as a way of life; they will run agriculture as a business.”

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