The LCCI notes and commends the new administration for raising the capital component of spending to 30% from 15% in 2015 budget. Many of the assumptions made in the 2016 draft budget seem to reflect the current realities and desired spending priorities for national development. It is our hope that adequate provision would be made [within the context of the capital provision] for infrastructure towards addressing the huge infrastructure deficit.
One of the effective means of covering the huge infrastructure deficit is Public Private Partnership (PPP) model. To facilitate private capital flow into infrastructure building we employ the government to develop attractive policy frameworks for PPPs. We also urge the fiscal authorities to review and monitor the quality of capital expenditure and ensure that funds are directed to the critical infrastructure needed to drive productivity.
The draft budget benchmark for crude oil at $38 per barrel looks very fragile given the continued and projected boost of supply side of oil in the international oil market and its potential impact on oil price. It is advised, in the circumstances, that the benchmark be further reduced. We subscribe to the position of government that greater emphasis would be placed on non-oil revenue through diversification driven by agriculture, solid mineral and service sectors. The quick win is for government to focus on policies and regulations that attract private capital and encourage investment. In addition, efficiency of tax administration is very vital to expand the current non-oil revenue base.
Exchange rate benchmark of N197/$ in the 2016 budget appears too conservative and at variance with prevailing realities. We hold that the exchange rate benchmark should be adjusted to N220/$ threshold in the 2016 budget.
We note with concern the growing budgetary provision for debt servicing. According to the Medium Term Expenditure Framework [MTEF] and Fiscal Strategy Paper [FSP], N1.3 trillion is provided for domestic debt service in 2016 mainly to service existing commitments. This figure represents 72% of the proposed capital expenditure in the budget. It is important that government devise an innovative strategy to reduce burden of debt service to the economy.
Noteworthy is the provision of zero allocation for kerosene subsidy which has been one of the biggest burden over the years. The reduction of federal government’s share of fuel subsidy to N63.29 billion compared to almost N1 trillion spent on subsidy in 2015 is also a welcome development. These will definitely free up resources to finance other priorities especially infrastructure. We reiterate our call for the deregulation of the petroleum downstream sector in order to reduce the pressure on government finances and the foreign exchange market. This will not only create savings for investment in priority sectors but also provide a great opportunity to attract more investment to the petroleum downstream oil sector.
We are happy with the disposition of Executive on the passage of the revised petroleum Industry Bill (PIB). The PIB is an important enabler to unlock opportunities in the oil and gas industry as well as transparent operating environment in the sector.
CHIEF, DR, MRS NIKE AKANDE, CON
LAGOS CHAMBER OF COMMERCE AND INDUSTRY
10TH DECEMBER 2015