Low oil production threatening our ability to achieve 2024 budget revenue — FG

The Federal government has decried the impact of lower crude oil production volumes on its revenues and ability to achieve the N19 trillion revenue projection in the 2024 budget.

This is contained in the Accelerated Stabilisation and Advancement Plan (ASAP) which was developed by the federal government’s Economic Management Team, EMT Emergency Taskforce (EET), and presented by Wale Edun, the minister of Finance and coordinating minister of the economy on Wednesday.

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According to the Minister, the federal government’s retained revenue for January and February 2024 was approximately 60.0 percent of the budget, largely driven by lower crude oil production volumes, running at 74.5 percent of the budget projection. He added if current revenue shortfalls persist, the revenue for 2024 is unlikely to exceed ₦15.8 trillion.

This is as oil production currently stands at 1.4 mbpd compared to 1.78 mbpd budget assumption and OPEC Quota of 1.5 mbpd, resulting in federal government revenue shortfalls. He added that the difficult economic conditions are threatening to unravel bold reforms undertaken by President Bola Ahmed Tuinubu-led administration.

“Our ability to achieve the 2024 Budgeted revenue step-up of 77.4% from 2023 actual is at risk should oil production remain at 27.0 percent below budget.50% of the annualized YTD variance suggests a lower-than-budgeted revenue of -N15.7 trillion at the current run rate,” he said.

“Difficult economic conditions are threatening to unravel bold reforms undertaken by Mr. President. The macroeconomic environment including persistently high inflation at 33.7 percent is the highest in almost 3 decades, high interest rates (Monetary Policy Rate at 26.3 percent) make it difficult for businesses to borrow and the exchange rate remains volatile with the resulting uncertainty disrupting economic activity.”

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The minister further highlighted the executive orders to bolster the ASAP to include; inflation reduction, revenue generation, non-oil export promotion, prudent financial management, and tax information consolidation.

Under the inflation reduction, the government plans to suspend import duty & value-added tax on specified items, boost the importation of paddy rice by millers, peg import duty exchange rate, prioritize productive spending, and enforce EO on default approvals.

For revenue generation, the government plans a relief for wage awards, transport subsidy to low-income staff, the tax deduction for the salary of incremental staff, an additional 50% uplift on eligible deduction on transportation, and other allowances and enables foreign employment for Nigerians as remote workers.

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Others include tax exemption for repatriated export proceeds of services & Intellectual Property, zero-rated VAT for all non-oil exports, relaxation of restrictions on the use of export proceeds, and removal of tax clearance certificates as a condition for foreign exchange applications, the introduction of tax information and collaboration Initiative(TICC), creation of TICC data bank to be managed by Joint TaxBoard, mandatory use of NINand registered company numbers and the National tax data governance framework.