FG Warns of Debt Sustainability Issues, Second Economic Recession
Minister of State for Budget and National Planning, Mr. Clement Agba, Thursday warned of debt sustainability crisis as a result of fiscal challenges in revenues.
Agba also warned that the economy stands the risk of lapsing into a second recession in four years except a strong third quarter economic performance is achieved, adding that already the second quarter GDP growth was negative.
Noting that the country faced serious challenges in the first half of this year, Agba added that fiscal challenges have continued in the medium term as a result of the disruption by the coronavirus pandemic.
Presenting a draft of the MTEF/FSP to the House of Representatives Joint Committees on Finance, Appropriation, Budget and Economic Development, he said the 2021-2023 MTEF/FSP was on the calculation that the oil price would be $40 per barrel with daily production of 1.86 million barrels at N360 per dollar.
He said, : ”crude oil prices declined sharply in the mild market with Bonny Light crude oil price dropping from a peak of $72 per barrel on January 7, 2020, to below $20 in April 2020 as a result of which the $57 crude oil price benchmark on which the 2020 budget was based became unsustainable.
”Massive output cut by OPEC and its allies to stabilise the world oil market was another key development in the international crude oil market with Nigeria contributing about 300,000 bpd of production cuts.”
Agba who represented the Minister for Finance, Budget and National Planning, Mrs. Zainab Ahmed, said inflation in the country will continue above single digit over the medium term as a result of issues on the cost of doing business.
To manage the crisis, he said there was the need for government to improve tax administration to optimize revenue as a major thrust of Strategic Revenue Growth Initiative (SRGI).
According to him, ”To enhance independent revenue generation and collection, the government will aim to optimise the potentials, operational and collection efficiency of Government Owned Enterprises (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 cost-to-revenue ratio of GOEs has, by a presidential directive, been limited to a maximum of 60 per cent to 70 per cent, while regular monitoring and reporting of revenue and expenditure performance of GOEs will be undertaken by both the Budget Office of the Federation and the Office of the Accountant General of the Federation.
“The Finance Bill 2020, which will accompany the 2021 Budget proposal, will contain measures to advance the SRGI. We shall also work closely with the National Assembly to amend relevant laws that need to be amended to help with the SRGI.”
Chairman of the House Committee on Finance, Hon. James Faleke, had during the session warned government agencies funded by the Appropriation Act against spending revenue it generates.
Faleke said the Accountant General of the Federation was expected to deduct such revenue from the accounts of any agency that is found to have defaulted.
Agba also warned that the economy stands the risk of lapsing into a second recession in four years except a strong third quarter economic performance is achieved, adding that already the second quarter GDP growth was negative.
Noting that the country faced serious challenges in the first half of this year, Agba added that fiscal challenges have continued in the medium term as a result of the disruption by the coronavirus pandemic.
Presenting a draft of the MTEF/FSP to the House of Representatives Joint Committees on Finance, Appropriation, Budget and Economic Development, he said the 2021-2023 MTEF/FSP was on the calculation that the oil price would be $40 per barrel with daily production of 1.86 million barrels at N360 per dollar.
He said, : ”crude oil prices declined sharply in the mild market with Bonny Light crude oil price dropping from a peak of $72 per barrel on January 7, 2020, to below $20 in April 2020 as a result of which the $57 crude oil price benchmark on which the 2020 budget was based became unsustainable.
”Massive output cut by OPEC and its allies to stabilise the world oil market was another key development in the international crude oil market with Nigeria contributing about 300,000 bpd of production cuts.”
Agba who represented the Minister for Finance, Budget and National Planning, Mrs. Zainab Ahmed, said inflation in the country will continue above single digit over the medium term as a result of issues on the cost of doing business.
To manage the crisis, he said there was the need for government to improve tax administration to optimize revenue as a major thrust of Strategic Revenue Growth Initiative (SRGI).
According to him, ”To enhance independent revenue generation and collection, the government will aim to optimise the potentials, operational and collection efficiency of Government Owned Enterprises (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 cost-to-revenue ratio of GOEs has, by a presidential directive, been limited to a maximum of 60 per cent to 70 per cent, while regular monitoring and reporting of revenue and expenditure performance of GOEs will be undertaken by both the Budget Office of the Federation and the Office of the Accountant General of the Federation.
“The Finance Bill 2020, which will accompany the 2021 Budget proposal, will contain measures to advance the SRGI. We shall also work closely with the National Assembly to amend relevant laws that need to be amended to help with the SRGI.”
Chairman of the House Committee on Finance, Hon. James Faleke, had during the session warned government agencies funded by the Appropriation Act against spending revenue it generates.
Faleke said the Accountant General of the Federation was expected to deduct such revenue from the accounts of any agency that is found to have defaulted.
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