2014 Has Been A Difficult Budget Year – Okonjo Iweala

BEVERLY HILLS, December 29, (THEWILL) –  The Minister of Finance and Coordinating Minister of the Economy (CME), Dr. Ngozi Okonjo-Iweala, has described 2014 as a difficult Budget year , stressing that fiscal outlook over the mid-term 2015-2017 will also be equally challenging.

Okonjo-Iweala stated this while presenting the overview of the 2015 Budget, tagged The Transition Budget, in Abuja.

According to the minister, “There have been challenges to the realisation of the 2014 Budget revenue projections. For a number of reasons chief among which is oil pipeline vandalism and the resulting “shut-ins”, we faced a quantity shock in the sense that the quantity of oil produced averaged about 2.2 million bpd in the first three quarters of 2014 according to NBS data, falling short of the 2.38 million bpd projected in the Budget.

“The effects of this quantity shock is further compounded by the more recent price shock, with prices crashing from a peak of about $114 pb earlier in June, to around $58 pb now, which is below the Budget benchmark price of $77.5 pb for this year.

“As a result, revenues will fall short of the Budget targets of N3.73 trillion. As at the end of October, total revenues were about N2.72 trillion, so we won't know the extent of the shortfall until government closes its books at the end of the year.”

She however said that in spite of this challenge, “we have managed to keep the country running. Recurrent Expenditure is being paid and government is running. We are aware of some MDAs, e.g. Education, where salary payments are delayed due to glitches in IPPIS. This is being rectified and all will be paid this December.”

Disclosing that capital expenditure however has suffered, she said “We could not cash back N100 billion of third quarter capital and have not been able to release fourth quarter capital.”

Nevertheless, she said “we have managed to keep most of our priority projects going with the support of SURE-P resources.”

Pointing to a more challenging year in 2015, the minister said “As the international oil market evolves, crude oil prices may probably never reach $100pb again. So Nigeria really needs to continue the diversification drive and “reset” the mind of every Nigerian to the emerging non-Oil economy we need to build.”

Okonjo-Iweala however assured that “This transition Budget will move us to take action on important short to medium-term measures that will lead to a deepening and widening of the diversification drive over the next decade.”

She therefore advised Nigerians to believe in the possibility of a Nigeria that no longer trembles because oil prices have moved “because we would have built a resilient Nigeria defined by Agriculture, Financial Services, Manufacturing, Petrochemicals, and a world renowned creative sector.”

She disclosed that the government plans to launch in January 2015 the Development Bank of Nigeria (DBN) – a wholesale financial institution that will support the private sector, especially SMEs to access more affordable financing with longer tenure.

Explaining that several Nigerian entrepreneurs still lack access to affordable financing, with medium- to long-term tenors, she disclosed that at least, over 20,000 entrepreneurs in critical sectors of the economy are targeted to be financed through the DFI in its first full year of operation.

According to Okonjo-Iweala, “We are working with partners such as the World Bank, the Africa Development Bank, the BNDES Bank in Brazil, and KfW in Germany, and have set aside the sum of N4 billion in addition to the N16 Billion provision in the 2014 Budget to realise this 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.”

The minister said due to all these efforts, GDP is expected to still grow by a decent 5.5 percent, driven by non-oil sector growth.

“This growth is important as it will enable us keep poverty in check. People often criticise our emphasis on GDP growth, saying “na GDP we go chop?” but the truth is that if GDP does not grow, poverty will worsen. GDP growth is therefore necessary but not sufficient for development and we need to bolster our non-oil growth rate.”