Senators bicker over Buhari’s oil benchmark for 2016 budget

10 Dec 2015
Chibuike Oguh

Summary

Deputy Senate President, Ike Ekweremadu (PDP, Enugu), asked the Senate to consider reviewing the oil benchmark to $40 for the 2016 budget because the $38 proposal was too conservative.

ke Ekweremadu

Nigerian senators expressed differing opinions on Wednesday over the $38 oil price benchmark proposed in the Medium Term Expenditure Framework (MTEF) and Fiscal Strategy Paper submitted to the Senate by President Buhari on Monday.

Deputy Senate President, Ike Ekweremadu (PDP, Enugu), asked the Senate to consider reviewing the oil benchmark to $40 for the 2016 budget because the $38 proposal was too conservative.

“I like to suggest that the senate consider an oil benchmark of $40. I’m sure that this will help cushion the problems we have in the states,” he said.

However, Adamu Aliero (APC, Kebbi), opposed Ekweremadu’s proposal, saying it was unrealistic given the fact that global oil prices are projected to fall further in 2016.

“I therefore recommend we take it to $35 per barrel,” Aliero said.

The MTEF contains the proposed budget of N6.077 trillion for 2016 with a revenue target of N3.82 trillion and a deficit of N2.22 trillion or 2.16 percent of GDP. Recurrent expenditure will drop to 70 percent in the 2016 budget compared with 84 percent in the 2015 budget. Capital expenditure will rise to 30 percent in 2016 compared with 16 percent in 2015.

The contribution of value added tax (VAT) to the revenue target of N3.82 trillion would rise to N67.7 billion from the N67.5 billion projected in 2015.

Domestic borrowing will rise to N1.2 trillion in 2016, but drop to N1 trillion in 2017, while the federal government plans to borrow N1.08 trillion in 2018. Foreign borrowings will rise to N635 billion in 2016 but drop to N416.82 billion in 2017 and N433.65 billion in 2018.

Speaking during the Senate debate, Ben Murray-Bruce (PDP, Bayelsa) said the federal government should borrow massively to industrialize the nation and develop infrastructure.

“It does not matter the party [the budget] comes from; what is important is that we develop,” he said.

According to the MTEF, N350.3 billion is projected as recoveries from misappropriated funds.

The recoveries include N137.90 billion from strategic alliance contracts entered into by the Nigerian Petroleum Development Company (NPDC) and some oil firms, N162.43 billion from the Nigerian National Petroleum Corporation (NNPC) and Central Bank of Nigeria (CBN), and N50 billion from other misappropriated funds.

The Subsidy Reinvestment Programme (Sure-P) will be funded with N241.5 billion from the Nigeria Delta Development Commission (NDDC) share of the Excess Crude Acccount. Social welfare intervention programmes such as school feeding programme initiatives, conditional cash transfers, and post-NYSC grant will gulp N500 billion in 2016.

The Presidential Amnesty Programme will also be funded with N20 billion in 2016, down from N63.2 billion budgeted in 2015.

In his remarks, Peter Nwaoboshi (PDP, Delta) said the Senate should be aware of hidden things in the MTEF such as removal of the kerosene subsidy, the reduction of the National Assembly budget, and the reduced funding to the Niger Delta amnesty progamme.

“The fall-out of the Bayelsa election showed that militants still existed. Thus, the federal government should jettison any plan to cut its commitment to the amnesty programme,” he said.

Chibuike Oguh is Financial Nigeria's Frontier Markets Analyst






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