The Senate of the Federal Republic of Nigeria has set the price of $52 per barrel of crude oil as the benchmark for revenue for the 2015 budget
| By Anayo Ezugwu | Mar. 9, 2015 @ 01:00 GMT |
WITH the decline in the international price of oil and revenue flow to the country, the Senate of the federal republic of Nigeria on Tuesday, February 24, fixed the price of $52 per barrel of crude oil as the benchmark for the N4.3 trillion 2015 budget. The Senate said its decision was due to the fact that the current oil price in the international market was hovering between $60 and $62.
The federal government had made the final proposal of $65 per barrel of crude oil to the lawmakers after two reviews. Ngozi Okonjo-Iweala, minister of finance, had in December 2014, presented the 2015 budget to the lawmakers based on estimated oil production figure of 2.2 million barrels per day.
President Goodluck Jonathan had forwarded three different Medium Term Expenditure Framework, MTEF, and Fiscal Strategy documents to the National Assembly between September and December last year with crude benchmark proposals of $77, $73 and $65 per barrel.
Other budget proposals include projected oil production of 2.2782 million barrels per day and an average exchange rate of N165 to a US dollar. The dollar currently trades at about N199 to a US dollar as the oil-dependent Nigerian economy continues to suffer from the declining global price of crude oil.
The Senate also slashed the allocation for petrol and kerosene subsidies presented by the ministry of finance in the Medium Term Expenditure Framework for 2015 – 2017. The upper chamber, while approving the MTEF, slashed petrol subsidy from N200 billion to N100 billion. It also reduced the subsidy allocated to kerosene from N91.08 billion to N45.52 billion.
Senator Ahmed Makarfi, chairman of the Joint Committee on Finance and National Planning, Economic Affairs and Poverty Alleviation: “The joint committee recommended a downward review of subsidy payment for PMS from N200 billion to N100 billion and kerosene from N91.08 billion to N45.52 billion. This is as a result of the current low prices in crude oil prices at the international oil market. The relevant committees of the National Assembly should through oversight, ensure the full implementation of the proposed kerosene subsidy and the availability and of the product.” He added that the reduction in the subsidy allocations to petrol reflected government’s commitment to transparency and accountability in the entire oil and gas sector.
In his remarks, David Mark, Senate President, said there was need for a budget cut across the three arms of government in view of the current economic reality. He said the government must continue with it reform policy in order to promote the growth of the non-oil sector. He expressed delight on the expeditious passage of the MTEF, adding that this is the kind of cooperation required to build the nation.
Reports have it that it is the first time the ministry captured allocation for kerosene subsidy in the budget. The provision may not be unconnected with ripples generated by the investigation into the alleged non-remittances of some funds in the sector.
The oil-price slump has hammered Nigeria, whose currency hit a series of record lows against the dollar in the last three months, despite the central bank burning billions of dollars of reserves to prop it up. This made Nigeria’s public finances to witness sharp drop, coupled with irregular supply linked to pipeline vandalism. The government depends on oil for around 80 percent of revenues.
Nigeria’s gross government revenue fell 15 percent to N416 billion ($2.07 billion) in January due to drop in oil prices. Investors in Nigeria’s Eurobonds are particularly anxious that efforts to support the local currency may be wasting reserves, a source told Reuters. But the central bank insists it has the forex needed to support the naira.
Even though Nigeria’s capital spending rarely materialises as planned, shelving projects such as port upgrades and roads could worsen inefficiencies that have plagued Africa’s most populous nation and biggest economy for decades. At the same time spending on military equipment is rising because of the insurgency in the northeast. It is unclear where the cuts will fall, with capital expenditure already slashed to 10 percent of the budget and the government struggling to pay salaries of its bloated civil service.