Oil Benchmark Increase: CBN Will Respond

The Governor of the Central Bank of Nigeria, Sanusi Lamido Sanusi, has reacted to the increase in the oil price benchmark in 2013 budget passed by the National Assembly, from $75 proposed by the Executive to $79, saying the CBN will adopt an appropriate monetary stance in response to it.

The National Assembly had on December 20 passed a N4.987 trillion budget for the 2013 fiscal year. The approved budget was N63 billion more than the N4.924 trillion proposed by the executive. The difference arose out of the change in the oil price benchmark from $75 to $79.

Some Nigerians had expressed worry over the oil benchmark increase, particularly because of the volatility of the crude oil market. They felt a high oil benchmark would hurt the economy if there were a sudden slump in crude oil price.

National Assembly Adopts $79 Oil Benchmark for 2013 Budget

After weeks of disagreement, the two chambers of the National Assembly have harmonized their divergent positions and adopted $79 per barrel as the recommended oil benchmark  for the 2013-2015 Medium Term Expenditure Framework(MTEF) and Fiscal Strategy Paper.

President Jonathan had predicated the 2013 -2015 MTEF and Fiscal Strategy Paper on an oil benchmark of $75 and had based the 2013 Appropriation Bill on the same benchmark. However, controversy arose when the House and the Senate adopted $80 per barrel and $78 per barrel respectively during the consideration of the proposals in their separate chambers.

This divergence of positions on the matter resulted in the setting up of a Joint Conference Committee in the National Assembly to explore the possibility of reaching a common position.

After extensive deliberations and consultations by the conference committee, a harmonized report was adopted yesterday, recommending $79 per barrel as the appropriate oil benchmark price. According to the report, the additional funds arising from the $4 increase over and above the $75 proposed by the executive will be used to reduce domestic borrowing and the budget deficit as well as funding critical infrastructure projects.

NNPC budgets N4bn for 30 new petrol stations

The Nigerian National Petroleum Corporation (NNPC) plans to build 10 new petrol stations for about N4billion next year
For 2013, NNPC has allocated N1,332.90 billion for what it tagged: “Three ultra-mega stations in YEPHLAG (Yenagoa, Port Harcourt and Lagos).” Construction of 10 standard stations would gulp another N1,850 billion while in the same list of major projects for 2013, NNPC voted another N750 million for 10 standard stations while the corporation will spend another N750 million to buy/lease 20 stations next year.
About N300 million was voted for trailer parks along Abuja-Lokoja and Ibadan Expressway. In the breakdown of major capital projects for rehabilitation of pipelines in 2013 (pipelines), NNPC said it would spend N3,950 billion to rehabilitate Escravos-Warri pipeline. Another N3,950 billion would be deployed to reconstruct the Escravos-Warri pipeline. Other pipeline expenditures are: rehabilitation of Port Harcourt-Enugu pipeline (N28,440 billion); rehabilitation of Warri-Benin pipeline (N15,800 billion); rehabilitation of Enugu-Auchincloss-Benin pipeline (N3,950 billion) and rehabilitation of Bonny-PH crude supply line pipeline will gulp N7,900 billion.
In its budget defence before the National Assembly, NNPC got $10.482 billion as its 2012 budget while it will spend $13.8 billion in 2013. It had initially requested $12.781 billion which was turned down. A breakdown of the budget indicates that government equity funding in Joint Venture (JV) companies is: $4.954 billion; funding for government’s priority project is $0.585 million, bringing total government equity funding to $7.365 billion. Government equity share of alternatively funded joint venture projects is $3.117 million, bringing totaling $10.482 billion for 2012 with 61 per cent performance ratio.

NERC Faults Budgetary Request for PHCN

The Nigerian Electricity Regulatory Commission (NERC) has said requests for budgetary provisions for the privatized successor companies of the Power Holding Company of Nigeria (PHCN) in the 2013 financial year by the National Assembly was unfounded.

NERC that such budgetary demands and justification for the Federal Government to fund the privatized electricity distribution companies beyond 2012 were not necessary considering the existence of the new Multi Year Tariff Order (MYTO-2) methodology. The commission said in a statement from its Assistant General Manager, Media, Maryam Abubakar, that the tariff methodology which was currently in use had provided for the distribution companies to be self-sustaining, stating that it could confirm that some distribution companies were actually meeting up with its financial obligations.

The House of Representatives had recently decried the lack of budgetary provisions for privatized PHCN successor companies in the 2013 budget.The House argued that additional funding for these electricity companies should be made despite the ongoing privatization process which would see new owners take over the companies by mid-2013. They had explained that there was a need to fund these companies in order for them to meet their capital spending obligations.

But NERC noted that the MYTO-2 was computed in a manner to allow the distribution companies pay for the energy delivered to them, meet up with their operational expenditures (OPEX) as well as their capital expenditures (CAPEX). The commission explained that statistics within its possession shows that since the introduction of the MYTO-2 in June this year, one of the companies, Eko Distribution Company was in November 2012, finally able to meet all its OPEX and CAPEX obligations, as well as settle its energy bill, all without subsidy intervention.

NNPC Denies Delaying 2013 Budget

The Nigerian National Petroleum Corporation (NNPC) has said it is not in any way causing delays in the passage of the 2013 budget as recently claimed by members of the House of Representatives, explaining that it has entirely cooperated with the legislators in the budget debate processes.

Reacting to claims by the Chairman of the House of Representatives Committee on Finance, Hon. Abdulmumni Jibrin, who had asked Nigerians to hold the corporation responsible for any delay in the passing of the country’s 2013 budget, the General Manager Media Relations of NNPC, Dr. Omar Farouk, said that the corporation could not have been responsible for any delay in the passage of the 2013 budget by the national assembly.

Omar explained that the corporation had severally honoured invitations for appearance from various relevant committees of the national assembly, in which it had made presentations and clarifications on its crude oil production and revenue projection plans, adding that Jibrin’s claims were unfounded.