It was also to help
achieve the country’s economic recovery post-COVID-19, an official said.
Following the
pandemic, the international oil market faced the biggest challenge in recent
history, with crude oil prices dropping from about $60 per barrel to below $12.
Nigeria’s expected
revenues from crude oil exports shrank from $57 oil benchmark in the 2020
federal budget to less than $20 per barrel, as government scrambled to adopt
alternative mechanism to fund the huge deficit.
But, a “Nigerian
Economic Sustainability Plan” launched last week on how the government plans to
achieve the speedy economic recovery in the post-COVID-19 era showed the
deregulation policy was introduced to help conserve the money the government
usually spends on fuel subsidy.
Under a deregulated
petroleum products market, the payment for fuel subsidy by the government would
give way to a regulated determination of the retail price of petrol sold by
marketers.
The Minister of
State for Petroleum Resources, Timipreye Sylva, told PREMIUM TIMES in Abuja
last week that the government expects to conserve as much as N1 trillion from
the implementation of the deregulation policy.
Fiscal measures
The other fiscal
measures to be implemented over the next one year to cushion the loss in oil
revenues include the establishment of a sustainable framework to build and
maintain the national strategic petroleum products stock across the country.
It is to be handled
by the Federal Ministry of Finance, Budget and National Planning in
collaboration with the Department of Petroleum Resources (DPR) and the Nigerian
National Petroleum Corporation (NNPC).
The measures also
include the need for the NNPC to remit 100 per cent of royalties and taxes paid
by oil companies to the federation account.
Other measures
include the continuous deductions from oil sector revenue by the NNPC to
maximise payments to the federation account; NNPC’s payment of commercial value
for all its crude oil lifting, and reduction in the average production costs of
crude oil by at least 20 oer cent.
The plan also covers
the N500 billion intervention fund to support the private sector and the micro,
small and medium enterprises; extension of the deadlines and suspension of
penalties for filing tax returns, providing targeted tariff reduction and trade
finance facilities to support strategic imports to boost economic growth.
Also, the plan has
provision for support to strategic industries affected by the pandemic, such as
the aviation, hospitality and road transport and health sectors; funding to the
pharmaceutical sector for the procurement of raw materials and equipment
required to boost local drug production.
The plan will
mobilise N86 billion intervention fund for health infrastructure to accelerate
procurement of health material and equipment; develop incentive package for
frontline healthcare workers; accelerate Infrastructure Completion, and expand
the scope of the Road Infrastructure Tax Credit Scheme (RITCS).
During the period,
additional revenue would be realised from the implementation of the VAT reforms
in the Finance Act 2020, by maintaining the increase in VAT rate to 7.5 per
cent in addition to the use of up to N2 trillion of pension funds for roads and
housing development projects.
Other initiatives
include developing business continuity plans for tax and customs administration
to provide services to citizens, taxpayers, and importers; rationalise
ineffective tax incentives and exemptions; increase remittances and recovery of
unremitted revenues from government –owned enterprises; sign-off of guidelines
of to capture revenues from cross-border business transactions.
Monetary policies
On monetary policy
measures by the Central Bank of Nigeria, apart from the N1 trillion provided
for loans to boost local manufacturing and production across critical sectors
of the economy, the apex bank would take steps to unify the exchange rates to
maximise naira returns to FAAC from foreign exchange inflows, while ensuring
the exchange rate is managed in a sustainable manner.
The plan also
expects the CBN to invoke partial risk guarantees for SMEs; grant additional
one year moratorium on CBN intervention facilities; reduce interest rate on
intervention facilities from 9 to 5 per cent; create N100 billion target credit
facility for affected MSMEs, and grant regulatory forbearance to banks to
restructure terms of facilities in affected sectors.
To provide a legal
backing to the Economic Sustainability Plan, the government said the National
Assembly would work with the Federal Ministry of Justice, Federal Ministry of
Finance, Budget and National Planning for a Fiscal Stimulus Act.
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