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FG to NASS: Approved $57 oil price benchmark no longer sustainable

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FG to NASS: Approved $57 oil price benchmark no longer sustainable

Zainab Ahmed

Minister of Finance, Budget and National Planning, Mrs. Zainab Ahmed, on Thursday said that “the US$57 crude oil price benchmark approved in the 2020 budget is no longer sustainable.”

Ahmed spoke while briefing the leadership of the National Assembly on the plan by the federal government to amend the N10.59 trillion 2020 budget passed by the legislature in December last year.

She, however, suggested that “it is necessary to reallocate resources in the 2020 budget; to ensure the effective implementation of required emergency measures, and mitigate the negative socioeconomic effects of the COVID-19 pandemic.”

Ahmed stated that in line with the global economic outlook and relevant domestic considerations, the assumptions underpinning the 2020-2022 Medium Term Expenditure Framework, MTEF and the 2020 budget was revised to slash crude oil benchmark price from US$57 per barrel to US$25 per barrel; reduce crude oil production benchmark from 2.18 million barrels per day to 1.9 mbpd.

She added that the federal government also adjusted the budget exchange rate to N360/US$1; and reduced the upfront fiscal deductions by the Nigerian National Petroleum Corporation, NNPC for mandated oil and gas sector expenditures by 65 percent from N1.223 trillion to N424 billion.

The minister also disclosed that the amount available for funding the 2020 budget is now estimated at N5.548 trillion, down from N8.419 trillion, a revised revenue estimate which is 34 percent (N2.87 trillion) lower than what was initially approved.

On Provision of N500 billion for COVID-19 Intervention Fund, she explained that N263.63 billion will be sourced from Federal Government Special Accounts, N186.37 billion from Federation Special Accounts and the balance of N50 billion expected as grants and donations.

According to her, “the sum of N186.37 billion will be applied toward COVID-19 interventions across the federation, while an additional N213.60 billion was provided in the Service Wide Votes for COVID-19 Crisis Intervention recurrent expenditures.”

She disclosed that while a total of N100.03 billion was provisioned in the intervention fund for new capital spending, the federal government carried out a cut in capital expenditures for MDAs from N1.564 trillion to N1.262 trillion.

Earlier in his remarks, the Senate President, Ahmad Lawan urged the executive arm of government to ensure that the interest of Nigerians remains protected in the proposed cut to the 2020 national budget.

Lawan also expressed the willingness of the federal lawmakers to expeditiously consider the proposed amendment to the 2020 budget which the minister said would be presented to the National Assembly by next week.

“The budget amendment is very important, but I believe that when we are faced with this kind of challenge (COVID-19 pandemic), it is an emergency and we should do everything and anything possible to fast track the passage and implementation of the government intervention that is so critical and crucial at this stage,” he said.

Also speaking, Speaker of the House of Representatives, Femi Gbajabiamila, called on the federal government to adopt a feasible benchmark in the proposed amendment to the 2020 budget.

“The benchmark is so critical and so important, because once you passed the law; it becomes difficult to adjust that benchmark, and then what happens to the excess?

“We have always had problems with the excess crude account, potentially an account which has no backing of the law. So, let’s even assume that the price remains static at $35, which means we have $10 going to the excess crude account which we have no control over in terms of spending, that is why we guard that benchmark price very jealously,” he said.

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