Lagos State Chambers for Commerce and Industry has called for urgent cut in government spending as oil price slide at the international market continues to put the country’s foreign exchange earnings in a precarious situation.
Dissatisfied with the 2015 appropriation bill where there is drop in capital expenditure allocation in country notorious for huge infrastructure deficit, the chamber says the current oil price benchmark should be brought to the current market reality of $40-$45 per barrel.
The chamber said such realistic benchmark aforementioned will create room for possible savings and adjustments for volatility shocks.
It will be recalled that of the N4.35 trillion in appropriation bill passed the National assembly for assent, capital expenditure got N633.53 billion, which is a drop in 59.2 percent compared with N1.55 billion the preceding year.
Further analysis showed that recurrent expenditure was allocated N2.61trillion, whichrepresents 60 percent of the total budget estimate and a 6 percent increase from the preceding year as personnel costs gulp N1.83 trillion which is 42 percent of the total estimate.
The concern about the structure of the appropriation is that it is at variance with urgent imperative of economic diversification and austere measures. Economic diversification requires a critical mass of investment in infrastructure, according to Remi Bello, President Lagos State Chambers of Commerce and Industries (LCCI), at a press conference on the 2015 Appropriation Bill of the Federal Government.
“A sincere commitment to the regime of austerity measures, cost reduction and economic diversification calls for a major review of the expenditure structure by National assembly,” said Bello.
According to a report released last year by the ministry of finance, the nation needs as much as $8 billion (which is 1.56 percent of the GDP) annually to bridge the huge gap in the nation’s public infrastructure
Nigeria, Africa largest economy have had budget slashed by 8.4 percent due to drop in the price of oil that makes up over 70 percent of revenue and 90 percent of foreign exchange earnings.
Oil fell 50 percent last year, the most since 2008 financial crisis, as supplies swelled amid the fastest pace in the United States production in more than three decade.
As reported earlier by BusinessDay, the country’s legislators spent N573.2 billion since its inauguration in 2011, meaning that N5.73 billion was spent on average to pass one bill.
“The drop in revenues available for people in 2015 are significantly higher than the drop in oil prices”, said Bismark Rewane, CEO of Financial Derivative Company.
“Things are different now and politicians have to know the buffers are gone,” Rewane said, adding that politicians may still choose personal interest over cutting spending on themselves.
Members of LCCI also called on federal government to deepen revenue base by improving tax administration to enhance compliance and addressing fiscal leakages.
Nigeria losses 400,000 barrels of crude oil per day to oil theft and pipe line vandalism.
The chamber also implored the National Assemble to take a critical look at areas such as fuel importation and inherent subsidy issues, total eradication of kerosene subsidy and rigorous review of budgetary provisions.
“A period like calls for economic stimulus to reinforce and expand the frontiers of the non oil economy,” said Bello.