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.

House Blames 2013 Budget Delay on NNPC

The House of Representatives has said that Nigerians should blame the Nigeria National Petroleum Corporation (NNPC) for any delay in the passing of the corporation’s 2013 budget. This was disclosed by the Chairman of the House of Representatives Committee on Finance, Hon. Abdulmumni Jibrin after the meeting of 60 revenue generating agencies.

According to him “NNPC has projected an oil production of 2.5 million barrels of oil per day. There is the need for NNPC to appear before the House Committee to explain how it intends to produce 2.5 million barrel of crude per day. We want to know the revenue expected from gas and the status of the Joint Ventures and other projections by the NNPC. Other revenue generating agencies like the Federal Inland Revenue Services, the Customs Service and the Department of the Petroleum Resources (DPR) have appeared before the House Committee on Finance, but the NNPC is yet to respond despite several invitations to it”.

On the benchmark to be used on the budget, since the Senate has benchmarked the budget on $78 and the House of Representatives on $80, the Chairman of the House Committee on Finance said, “since there was a disagreement on the benchmark to be adopted, the matter has been referred to the National Assembly Conference on Finance and the leadership of the two houses of the National Assembly. We expect them to resolve the matter based on the legislative procedures.”

Oil benchmark battle may delay 2013 budget

The dispute over the oil benchmark for the 2013 budget may soon snowball into a big fight that could delay the passage and implementation of the budget.

President Goodluck Jonathan had presented the budget proposals to a joint session of the National Assembly explaining that his proposed $75 benchmark was expedient. The Senate had increased the benchmark to $78, arguing that the new benchmark would help government to reduce deficit and domestic borrowing, and increase spending. The House of Representatives insisted that it would not back down from its demand that the benchmark should be $80 per barrel of crude oil.

The aggregate value of the 2013 budget is N4.9tn. Out of the figure, N2.4tn is for recurrent expenditure. The sum of N1.5tn was voted for capital projects, while N591.7bn was earmarked for debt servicing. The balance of N380bn was set aside for statutory transfers.

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.