By Amechi Ogbonna with agency report
The Federal Government yesterday unveiled its key benchmarks for the 2017 budget, pegging oil price at $42.5 per barrel and daily production output at 2.2 million barrels per day.
Minister of Budget and National planning, Udo Udoma unveiled the government’s plan on Monday at medium term fiscal framework public consultative forum with Civil Society Organisations (CSOs) and the Organised Private Sector.
Udoma revealed that the Federal Government expects oil output to move up to 2.2 million barrels per day in 2017, rising to 2.3 million and 2.4 million in 2018 and 2019 respectively despite hostilities in the Niger Delta region.
The government also expects oil prices would firm to $45 in 2018 and $50 in 2019. Udoma believes the naira would settle at 290 against the dollar in 2017 as against its current over N3000 per dollar price.
The CBN had initially said, in a letter to President Muhammadu Buhari, that it was “reasonably optimistic” that the naira would settle at N250 to a dollar.
On 2016 budget, Udoma said the Federal Government had spent N2.1 trillion in the past two months, with N598.63 billion going to service existing debts and N331.58 billion on capital expenditure. He said that Company income tax (CIT) is projected at N1.788 trillion in 2016, but expected to rise to N1.86 trillion in 2017.
The Minister also told the CSOs that the nation’s value added tax (VAT) was also expected to grow to 42.4 percent in 2017 as states ensure active generation of internal revenue.
He said non-oil revenue would be the game changer for the Buhari administration, urging the private sector to work with the government to deliver the much-needed change.
As at Monday afternoon, when the minister spoke, Brent crude went $44.80 per barrel, while the naira was trading well above N310 to the greenback.
The 2016 budget was predicated at oil price of $38 per barrel, while naira was put at 197 to the dollar.
According to Bismark Rewane, economist and CEO of Lagos consultancy Financial Derivatives, the oil price projections remains conservative but the risk of further attacks in the Niger Delta are likely.
“What is the plan to fund the (budget) gap if production falls?” he asked.
Udoma said “a significant increase in non-oil revenue receipts” was projected for 2017 to 2019 as the economy gradually recovered and tax collection improved.
Crude sales currently account for around 70 percent of government revenue and 90 percent of foreign earnings in Africa’s biggest economy.
Udoma said currency assumptions for the 2017-2019 period were for a steady naira/dollar rate of 290. That compared with a rate of 313 on Monday afternoon.
The West African country has budgeted for a record 6.06 trillion naira ($19.64 billion) of expenditure this year, of which he said 2.123 trillion naira had already been allocated.
The 2016 budget, signed into law in May, assumes oil production of 2.2 million barrels per day at a price of 38 dollars a barrel.
Crude prices have rallied in the last few weeks in part due to the impact of the Nigerian attacks on global supply. But Brent crude futures were trading at $44.86 a barrel at 1334 GMT, their lowest since May 11, amid concerns about a glut.
The central bank floated the naira in June after removing a peg of 197 per dollar it had held for 16 months. Since then, the currency has hit all-time lows.
Udoma said value-added tax (VAT) receipts were expected to increase by around 42 percent in 2017. At 5 percent, Nigeria’s VAT rate is among the lowest in the world.
Earlier this year, the government said it was considering changes to the tax regime.
Meanwhile, Nigeria’s naira slipped 2.5 percent to a new closing low of 310 per dollar on Monday, failing to lure in local investors or foreign players as trade dried up a day before an expected interest rate hike from the central bank.
The currency had opened at a record low of 302.10 on Monday and traded a total of just $8.64 million by the close, far less than $100.54 million on Friday, when the central bank spurred the market by selling some of its dollars.
Dangote drops off list of 100 richest men
Following the crash of the naira, Aliko Dangote, President of Dangote Group, has dropped off the list of the 100 richest people in the world.
Dangote was the 51st richest man in the world as at March 2016, but he had dropped to 101 as at the start of business on Monday.
Notwithstanding this development, Dangote, who owns the second largest sugar-refinery in the world, is still richer than Donald Trump, American billionaire presidential candidate, and Oprah Winfrey, US TV personality, who is also the second richest black woman in the world.
Dangote is now worth $11.1 billion, while Trump and Oprah are estimated at $4.5 billion and $3.1 billion, respectively. The fall in the naira, as against the dollar, from about 198 to over 300, had eroded about a quarter of Dangote’s wealth, as he commits to investing heavily in Africa’s largest economy.
At the launch of the new foreign exchange regime on June 23, 2016, Dangote fell from 46 on the world billionaire list to 71, and has continued in that manner as the naira plunges.
According to Bloomberg billionaires, Dangote, who was worth $15.4 billion (N3.05 trillion) in March, is now worth $11.1 billion (N3.3 trillion) —richer in naira, but poorer in dollars.
The launch of Dangote refinery, the biggest greenfield refinery in the world, billed for 2018/2019 is expected to propel him into top 20 by 2019.
Dangote Cement, one of Dangote’s major investments in Nigeria, is the biggest company on the Nigerian Stock Exchange, by market capitalisation, and the biggest cement producer in sub-saharan Africa.
The company however missed out of the 100 biggest companies in the world, according to Fortune 500.