Oil Benchmark: House, Okonjo-Iweala heading for collision

The row over the oil benchmark for the 2013 budget has continued with the House of Representatives calling on the Coordinating Minister for the Economy and Minister of Finance, Dr. Ngozi Okonjo-Iweala, to either obey the law or resign. According to the House, the minister’s insistence on the $75 per barrel oil benchmark breached the 2013-2015 Medium Term Expenditure Framework (MTEF) and Fiscal Strategy Paper passed by the House on October 9. The House had approved $80 as the oil benchmark for revenue projections in the 2013 budget under the MTEF.

The Chairman, House Committee on Finance, Dr. Abdulmunini Jibrin, said the MTEF was already a law that must be complied with just as the 2013 Appropriation Bill will pass through second reading today during plenary in the House.

However, the Coordinating Minister for the Economy and Minister of Finance, Dr. Ngozi Okonjo-Iweala, has said the adoption of $75 as the oil benchmark for the 2013 Budget was to curb inflation. Okonjo-Iweala said a higher oil benchmark would not only lead to higher inflation but also a decline in the value of the naira and also lead to lower savings and reduced investment.

Crude Oil Production Drops to 2.4mbpd

After recording an all time high crude oil production figure of 2.7 million barrels per day (mbpd) late July, Nigeria’s production of crude oil now averages at 2.4 mbpd. According to a statement from the acting General Manager, Public Affairs of Nigerian National Petroleum Corporation (NNPC), Mr. Fidel Pepple, the latest production figure was made known by the Group Managing Director of NNPC, Mr. Andrew Yakubu, at a function in Kaduna.

If the trend persists, it may affect the Federal Government’s revenue projection for 2013 for which the nation hopes to spend N4.929 trillion. 

The Federal Government in the Medium-Term Expenditure Framework (MTEF) and Fiscal Strategy Paper that President Goodluck Jonathan submitted to the National Assembly in July had hinged revenue projection on the production of 2.53 mbpd of crude oil.

MTEF: House recommends $82/barrel oil benchmark

The Joint House Committee on Finance, Legislative Budget and Research, National Planning and Economic Development as well as Loans, Aids and Debt, which is saddled with the responsibility of scrutinizing the 2013-2015 Medium Term Expenditure Framework (MTEF) and Fiscal Strategy Paper has recommended an increase in the crude oil benchmark for the 2013 budget from $75 to $82 per barrel.

It has also slashed the budget deficit for next year from N1.3 trillion to N791.26 billion and is proposing that internal borrowing be reduced from N727.19 billion to N381.25 billion, representing a 52 per cent cut.

The hike of the oil benchmark is expected to increase the federally collectible revenue in 2013 from N7.3 trillion to N7.9 trillion, and will also increase the Federal Government's share of revenue from N3.561 trillion to N4.137 trillion.

In a report presented to the House, the committee observed that the gloomy picture painted by government on the volatility in the global oil market and fears that crude oil prices may crash within the period under review was not realistic. The report addresses modifications to the MTEF and Fiscal Strategy Paper based on the contributions of members of the House at their meeting. It is also premised on submissions by revenue generating and accounting agencies of government.