After several weeks of bated breath, the Senate on Tuesday approved a $52 per barrel oil benchmark for the 2015 budget. It also predicated the budget on an EXCHANGE RATE of N190 to the dollar.
This is just as the Minister of Petroleum Resources, Mrs. Diezani Alison-Madueke, has restated that she is not opposed to the release of the full forensic audit report on the Nigerian National Petroleum Corporation (NNPC), but expressed concern that it might be politicised by the “rabid opposition” in the country.
The resolution on the budget benchmark and EXCHANGE RATE was the outcome of a one-hour closed-door session held by the senators before the commencement of plenary.
A source told THISDAY that several senators who spoke at the closed-door session, expressed concern over the state of the economy, regretting that the nation would have to resort to borrowing to finance some projects.
According to him, it was resolved that most of the budgetary allocations to various sectors would have to be adjusted to reflect the true state of revenue expectations.
He also said that implementing capital projects this year would be a herculean task as a result of the drop in revenue occasioned by lower OIL PRICES.
The source added that although the Senate was conscious that the naira was currently being exchanged at the rate of about N199 to $1 in the interbank market, the Senate deliberately opted to approve a lower figure for the EXCHANGE RATE.
The federal government had on December 17 laid a budget of N4.357 trillion predicated on a $65 per barrel oil benchmark and an EXCHANGE RATE of N165 to one dollar for the 2015 fiscal year.
The document also consisted of N2.622 trillion for recurrent expenditure, N627 billion for capital expenditure and N3.602 trillion as the government’s revenue target in 2015.
Despite dwindling oil revenue at the time, the federal government stuck to the $65 per barrel oil benchmark proposed for the 2015 budget as contained in the revised Medium Term Expenditure Framework (MTEF) which it re-submitted to the National Assembly on December 2.
Prior to reducing the oil benchmark to $65 a barrel, the federal government had reviewed the oil benchmark from $78 to $73 per barrel on November 18.
The Senate’s approval of the $52 oil benchmark, THISDAY learnt, may not be unrelated to the agreement reached by the executive arm of government and the National Assembly to settle for the new benchmark following weeks of negotiations between them.
Both arms of government had been meeting to find an agreeable benchmark but disagreements over some budget details have lingered.
A source privy to the negotiations disclosed that while the executive had proposed $50 per barrel, the lawmakers rooted for $55 per barrel, after which both parties were said to have finally agreed on $52 per barrel.
Another major highlight of the negotiations was the executive volunteering a 25 per cent cut in the State House budget.
An initial agreement of N115 billion was also reached as the National Assembly budget, which is N35 billion or 23 per cent short of the lawmakers’ regular N150 billion annual budget.
But THISDAY gathered that while majority of the lawmakers supported the cut in the National Assembly’s budget, some have kicked against it because they do not want to lose their privileges.
Those kicking against the new benchmark as well as the reduction in the National Assembly budget are also said to be demanding that N50 billion allocated to constituency projects be paid instantly.
Meanwhile, the petroleum minister, in an interview with the Financial Times of London, has said she is not opposed to the release of the full forensic audit report on NNPC, but pointed out that the “rabid opposition” may find some minute detail to twist out of context even though she has nothing to fear.
After its submission to President Goodluck Jonathan, only highlights of the forensic audit, carried out by PricewaterhouseCoopers (PwC), were released to the public, with no indication that $20 billion was unaccounted for, as alleged by the former Central Bank of Nigeria (CBN) Governor and now Emir of Kano Muhammad Sanusi II.
The PwC report had however indicated that $1.48 billion was yet to be remitted to the national coffers by the corporation’s E&P subsidiary, Nigerian Petroleum Development Company (NPDC).
It also expressed concern over the NNPC statute, which enables the corporation to deduct expenses from source before the transfer of funds to the Federation Account.
But the All Progressives Congress (APC), its presidential candidate, Major-General Muhammadu Buhari, and the House of Representatives have demanded that the entire report be made public.
Alison-Madueke told FT that both she and the president would not oppose the publication of the report.
She said there were pros and cons to publishing the full findings, adding that the “rabid opposition” might “find all sorts of minute details to create concern”.
She also told FT that members of the Organisation of Petroleum Exporting Countries (OPEC) had discussed holding an emergency meeting if the price of crude oil continues to slide.
The comments by Alison-Madueke come three months after the cartel’s decision to hold production at 30 million barrels a day, even as the OIL PRICE has plunged since mid-June.
That move, driven by Saudi Arabia and its Gulf allies, marked a sharp deviation from OPEC’s traditional strategy of adjusting production to keep prices high. The group’s main objective is now to defend market share, despite dramatically reduced revenues.
The price plunge has forced energy companies all over the world to rewrite their investment plans, and caused a major slowdown in the US shale oil industry. But it has also thrown the fiscal balances of big oil producers such as Nigeria, Venezuela and Russia into disarray.
“Almost all OPEC countries, except perhaps the Arab bloc, are very uncomfortable,” said Alison-Madueke, who as president of OPEC is responsible for liaising with member countries and the producer group’s secretary-general in the event of an emergency meeting.
If the price “slips any further it is highly likely that I will have to call an extraordinary meeting of OPEC in the next six weeks or so”, she told FT. “We’re already talking with member countries.”
But market analysts have said it is highly unlikely that Saudi Arabia, OPEC’s de facto leader, will agree to such a meeting.
After hitting a high of $115 a barrel in June, the price of internationally traded Brent crude oil has dropped rapidly and almost hit $45 a barrel last month — a near six-year low. Although the price has since recovered to around $60, Alison-Madueke said she was not convinced a floor had been reached.
“It is hoped that (the price) will stabilise at no less than $60, but we cannot be sure,” she said.
Alison-Madueke said OPEC’s role needed to be reconfigured over the next two years “if we are to remain strongly relevant”, by formalising discussions with key oil producers outside of the cartel such as Russia and the US, as well as global groups like the International Energy Agency (IEA) and the G20.
“It cannot only be OPEC that is responsible for stability in the market,” she said. “The world has moved on from the days when OPEC was the be all and end all.”
OPEC is scheduled to meet next in June, although in times of market turmoil the group often convenes emergency meetings. But all 12 members have to agree to such a move.
Alison-Madueke said members were “very cognisant of the Saudi position”.
In a bid to protect market share, the kingdom convinced fellow members that a period of lower prices would shave off some supply from rival producers, such as the US, with higher production costs.
Ali Al Naimi, Saudi Arabia’s veteran oil minister, said in December it was braced for further drops in the OIL PRICE and would not change its strategy even if prices hit $20 a barrel.
Alison-Madueke said she supported the November decision. “When you cede market share continuously, you drive yourself into oblivion,” she said. But she added that many OPEC members “are going to suffer greatly from a drastic fall in the price”.
The slide in the OIL PRICE has plunged Nigeria’s economy into turmoil. The country, which is Africa’s largest producer, depends on oil typically for about 70 per cent of government revenue.
THISDAY
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