ABUJA, NOVEMBER 28, 2017 – The Federal Government has concluded plans to sell key national assets in a bid to generate sufficient revenue to finance Nigeria’s annual budgets between 2018 and 2020. Director General, Budget Office, Mr. Ben Akabueze, disclosed this yesterday in Abuja at a public hearing organised by the House of Representatives joint committees on finance, appropriation, loans, debts and aids and legislative budget and research on the 2018-2020 Medium Term Expenditure Framework (MTEF) and Fiscal Strategy Paper (FSP).
Akabueze explained that proceeds from sales of the key government assets, which include National Integrated Power Plant (NIPP) plants, National Parks, as well as the National Arts Theatre and Tafawa Balewa Square in Lagos are to be deployed as financing items for the 2018 budget.
President Muhammadu Buhari had, in his budget presentation to the National Assembly, disclosed that the Federal Government is targeting N306 billion from proceeds of privatisation of some non-oil assets by the Bureau of Public Enterprises (BPE) to finance the budget deficit.
“We plan to finance the deficit partly by new borrowings estimated at N1.699 trillion. Fifty per cent of this borrowing will be sourced externally, whilst the balance will be sourced domestically.
The balance of the deficit of N306 billion is to be financed from proceeds of privatisation of some nonoil assets by the Bureau of Public Enterprises (BPE),” the president told the lawmakers. Akabueze disclosed that the power generation plants constructed by the Niger Delta Power Holding Company (NDPHC) under the NIPP on behalf of the government would be sold.
Some of the NIPP expected to be sold include Alaoji Power Station in Abia State, a 1074 Mega Watts (MW) capacity plant; the 561MW capacity Calabar Power Station; the Egbema Power Station, a 338MW simple cycle gas turbine plant and Geregu II Power Station in Kogi State with 434 MW capacity.
Others include the 450MW Ihovbor Power Station in Benin City; Olorunsogo Power Station, a 336MW plant located at Olorunsogo; Olorunsogo II Power Station with combined cycle gas turbine of 675 MW capacity; the Omoku II Power Station in Omoku with 225 MW capacity. Also to be sold are Omotosho II Power Station with 450 MW capacity and Sapele Power Station with 450 MW capacity.
Other items to be sold are non-core assets from the mines and steel sector, houses, and estates. He said proceeds from privatisation of key government assets were factored in the 2018 budget, to finance especially the budget deficit of N2.005 trillion, much of which will be financed through domestic and foreign.
According to the Director General, the country was generating too little revenue; hence it was expedient to borrow. He added that the reverse would be the case if actually there were more revenue collectibles. “We are generating too little revenue, hence we are borrowing.
If we generate enough, borrowing ratio will drop.” Meanwhile, the Minister of State for Budget and National Planning, Hajia Zainab Ahmad, has said the Federal government has proposed to generate additional N1 trillion nonoil revenue to reduce the deficit and loans in the 2018 budget.
Ahmed, who disclosed this in her presentation before the joint committee, explained that this will include an additional N60 billion from duties on cigarettes and alcohol and N2.5 billion from “special taxes” on luxury cars.
Giving details of the revised MTEF/FSP, the minister said: “When the FEC approved the MTEF/FSP, it constituted a committee chaired by the Minister of Finance, Mrs. Kemi Adeosun, which was tasked with identifying additional sources of about N1 trillion revenue to cut the 2018 budget deficit and new borrowings.
The outcome of the work of the committee necessitated a revision of the MTEF which also formed the basis of the 2018 budget proposal.” According to her, the adjustments include “N710 billion to be generated from the restructuring of government’s equity in all the Joint Venture oil assets; and N320 billion additional revenues from revision of terms to improve government’s take in the production sharing contracts.”
Speaking further, Ahmad disclosed that also expected are N350 billion as additional Company Income Taxes expected to result from the Voluntary Assets and Income Declaration Scheme (VAIDS); N100 billion from improvements by the FIRS in the collection of Value Added Tax (VAT); and N2.5 billion from “special taxes on insurance of luxury cars as well as surcharge on luxury goods.”
However, chairman of the joint committee, Hon, Babangida Ibrahim had frowned at the absence of five government agencies at the session.
Meanwhile, the Nigerian National Petroleum Corporation (NNPC) has said the Federal Government’s 2.3 million barrels per day crude oil projection for the 2018 Budget is achievable and realistic. Group General Manager (GGM), Corporate Planning and Strategy, Mr. Bala Wunti, made the submission at the hearing.
Wunti said the current production capacity for the country was more than 2.3 million barrels per day, noting, however, that due to the insecurity in the Niger Delta, the full production capacity has not been achieved over the years. “The 2018 crude oil national production projection for Joint Ventures, Modified Carry Arrangement or External Financing, Production Sharing Contracts, Independents, Marginal Fields and Service Contracts is about 2,298,000 barrels per day,” Wunti said.
He disclosed that the 2018 price projection on the long term price assumption was based on price scenarios of $35 (low), $45 (medium) and $55 (high), stressing that most price forecasting agencies thought that the medium price scenario had the highest probability of occurrence which the 2018 budget was hinged upon. “Consequently, a conservative price projection of $45 per barrel was used as benchmark for crude price for 2018 budget,” Wunti stated.
Giving details on the 2017 performance of crude oil production from January to October, Wunti averred that the average performance stood at 1,885,000 barrels per day which is equivalent to about 86 per cent of the budgeted 2.2 million barrels per day. According to him, performance shortfall was mostly due to Niger Delta security related factors and vandalism of key export infrastructure, including Trans-Forcados Pipeline (TFP), Forcados Oil Terminal (FOT) export line, Nembe Creek Trunk Line (NCTL) and Trans Niger Pipeline (TNP). He said robust engagement of stakeholders in the Niger Delta by the Federal Government and the NNPC had led to improved production in recent months, disclosing that sustained peace in the Niger Delta, price recovery and improved Joint Venture production would help to support government’s revenue aspirations.
Wunti noted that the average crude oil price performance between January and October 2017 was $52.49 barrels per day, an equivalent of 18 per cent over performance of budget price benchmark of $44.50 barrels per day. According to him, the 18 per cent above budget benchmark was due to stability in the crude oil market and various geopolitical dynamics around the world.
He observed that the outlook was reassuring, given the positive global economic growth and the improved compliance with the Organisation of the Petroleum Exporting Countries’ (OPEC) production cut, adding that the incident of oversupply remains an issue.