Worries over oil price as budget scales second reading
THERE was palpable worry yesterday in both chambers of the National Assembly over the possibility of implementing the 2015 Appropriation Bill due to the falling price of crude oil in the international market, just as the budget scaled Second Reading in the Senate and House of Representatives.
The budget passed second reading in the Senate and was consequently referred to the Committee on Finance and Appropriation which is expected to submit report within four weeks.
Shortly after, the Upper Chamber adjourned plenary until February 17, 2015 to enable members participate actively in the coming elections.
The general mood of the chamber as it considered the bill was however that of serious concern over how the executive intends to realise the budget that is predicated on $65 per barrel crude oil price when the prevailing oil price has fallen below $40 per barrel.
Recall that the Presidency had on December 17, 2014, laid before the National Assembly the budget estimate of N4,357,960,000.00 based on $65 per barrel crude oil benchmark, projected oil production of 2.2782 million barrels per day and at the average exchange rate of N165 to one dollar.
The senators’ fear hinged on the possibility of realising the budget on the oil benchmark that is currently at $20 per barrel deficit in a country whose revenue generation is largely dependent on oil.
Leader of the Senate, Victor Ndoma-Egba, in the lead debate, gave the breakdown of the budget to include statutory transfer of N411,840,000.00; debt service of N943,000,000.00; recurrent (non-debt) expenditure of N2,616,07,426,233 and a capital expenditure of N627 billion.
According to him, the 2015 budget was designed to build on the successes of the 2014 budget with emphasis on fiscal consolidation, inclusive growth and job creation, which will be achieved by focusing more on macro economic stability, consolidation on structure reforms, enhanced governance and institutional goals as well as diversification of the economy with key emphasis on agriculture and investment in other priority sectors.
“The capital expenditure outlay of the Appropriation Bill 2015 is deliberately structured to improve and effectively addresses critical areas of the economy,” Ndoma-Egba said.
While the lawmakers in their contributions maintained that it could be challenging for the budget estimate to be generated in the face of dwindling oil price, they flayed the executive over the continuous increase in the recurrent expenditure over capital expenditure.
“Even though it is based on a benchmark of $65 per barrel which surely is not realistic at the moment, it only provides N387 billion for capital development which is over a trillion naira off what was budgeted for it last year. So, this is not a budget you can look at as an expansionist budget. This definitely is an austerity budget – a belt tightening budget, but equally, it should be a wake up call that we must not continue to rely on financing public expenditure based on oil revenue which is highly volatile.
“We have to look out to other areas of getting revenues to the coffers of government and that is a long and tedious work on itself. There is also the average exchange rate of N165 to a dollar.
“These are key parameters of the benchmark which was used to produce the budget, but it is actually out of tune with the reality. We must cut down on cost of governance. When we say cutting down on cost of governance, we are not saying that you have to lay-off workers but that various areas of wastage be blocked.
“What I am saying is that it is a very trying moment. I support that we take it at the second reading stage and pass it to relevant committees, but the caution is that it is more likely going to shrink than expand. Therefore, it is not a budget to see where we can add these or that but a budget for further belt tightening. The onus is on us to actually save the public finance by passing appropriate MTEF and a budget that we can finance,” Ahmed Makarfi (Kaduna North) said.
For Ayogu Eze (Enugu North), there is need to expand the economy and put it on the part of sustainable growth. “If there is any time we need to expand our economy and put it on the path of sustainable growth, it is now. If you look at the indices or the assumptions in the budget, what you see is benchmark oil price, projected production etc. In a properly organised detailed economy, we should be talking about revenue indices and not just oil.
“We have to talk about where the money is coming from but right now, the only thing you can see in this paper is what to get from oil and what we did not get from oil. I think that this is an opportunity for us to return to the development plans that we have had in this country.
“We have to go back to our rolling plans so that we can have some level of certainty and every year’s budget will now collocate into the budgets of the rolling plans.”
Olubunmi Adetunbi (Ekiti North) described the budget as unrealistic as, according to him, “the assumptions on the revenue side of the budget is totally exaggerated and the implication of that is that expenditure that we are asking committees to look at are expenditures for which there will be no money to finance and the reason there will be no money to finance those expenditures is that right now, they are grossly exaggerated assumption that the price of oil is $65 per barrel.
“We all know that the price for oil as we speak, is in the threshold of $45 to $46 per barrel. Therefore, the budget we are sending to committees is in deficit of $28 per barrel of monies that will not come.”
Also, the House of Representatives yesterday expressed concerns over the fate of the 2015 Appropriation Bill due to the persistent fall in international price of crude oil, just as the bill scaled second reading.
The Speaker, House of Representatives, Aminu Waziri Tambuwal, who announced the suspension of regular plenary until February 17, 2015 has, however, directed all relevant standing committees to commence work on the estimates in synergy with that of Finance and Appropriation with a view to turning in the report as soon as possible.
Leading debate on the bill, Majority Leader of the House, Mulikat Akande-Adeola, who gave key sectoral highlights of the N3.6 trillion budget said: “The focus in the 2015 budget is continuous job creation through infrastructure development, particularly in the areas of power, roads, agriculture, youth empowerment in Agriculture Programme (YEAP), housing and construction, creative industry and SURE-P,” she stated.
According to her, N411.84 has been allocated for statutory transfers as against N399.69 for same in 2014, N943 billion for debt servicing against 712 billion in 2014, N2.62 trillion for recurrent non-debt expenditure against N2.43 trillion for same last year, and N387.112 billion for contribution to capital expenditure against the sum of N1.1 trillion in 2014.
Contributing on the general principles of the bill, Chairman, House Committee on Appropriation, John Enoh, explained that a lot of projections in the budget bill would be expected to change as crude oil price continues to go down.
He explained that such would be taken into consideration so as to give a realistic budget to Nigerians. “We need to be very realistic and practical in what figures to pass,” he stated.