Budget 2013: Why Nigeria’s oil benchmark is $75 – Okonjo-Iweala

11 October 2012, Sweetcrude, ABUJA – DR Ngozi Okonjo-Iweala, Nigeria’s  Finance Minister and co-ordinating Minister for the Economy, says the  Federal Government assumed a benchmark oil price of $75 per barrel in  the 2013 proposal on the belief that the price will “shore up the  economy and make for macro economic stability”.

President Goodluck Jonathan presented the N4.9 trillion budget proposal to the National Assembly on Wednesday, predicating benchmark oil price at $75 per barrel and daily oil production at 2.53 million barrel per day.

The National Assembly, however, has expessed preference for $80 per barrel benchmark oil price, which, observers say, may occasion a showdown between Jonathan and the lawmakers.

Okonjo-Iweala said the arm of government will try to prevent a showdown. The executive arm, according to her, will “put forward the argument why government submitted the budget with $75 benchmark to the National Assembly”.

The benchmark, she explained, “is based on an econometric module that estimates five and 10 years moving averages. Government can not just take the number from anywhere; you have to have a basis for developing the benchmark.”

It is also similar to what other oil producing countries use as their respective benchmark prices, the minister said.

She stated: “The benchmark for Algeria is $37, Venezuela $50, Qatar $55, Kuwait $60, Saudi Arabia $60, Oman $75 and Angola $77.

“What government is proposing is within the ambit of what other countries are proposing. We don’t see any country with $80 benchmark.”

According to Okonjo-Iweala, the $75 price “will safeguard what is precious to the economy which is the macro economic stability of the country”.

She added: “If we go with a high benchmark, a lot of liquidity will be thrown into the system because it’s not just the Federal Government we have to worry about, the benchmark also affects the money that goes to the states.

“So even if you are trying to reduce federal government’s fiscal deficit; the states are not under that obligation. They will be spending and that will throw up a lot of liquidity, which can lead to higher inflation and depreciation of the exchange rate, which will force the Central Bank of Nigeria (CBN) governor to raise interest rates, which is not pleasant for the private sector.”

She also argued that with the global uncertainty ravaging the world, the impact will be that of low global demand for products “and when you have low global demand, it affects the prices of those products and countries that depend on a mono product will be exposed.”

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  • Nigerian lawmakers must treat issues regarding the budget with the seriousness it deserves and not play to the gallery. We believe that the lawmakers should make an issue ot of poor implementation of the 2012 budget, as well as others in the past, and not a technical issue such as the benchmark for crude oil price.

  • truth

    “The benchmark for Algeria is $37; Venezuela, $50; Qatar, $55; Kuwait, $60; Saudi Arabia, $60; Oman, $75; and Angola, $77. What government is proposing is within the ambit of what other countries are proposing. We don’t see any country with $80 benchmark.”
    This shows that most of our lawmakers are not close to the reality of serving the masses. It’s all about what they and their state Governors will get.
    I wonder how many of them (Lawmakers) look at the daily, monthly and yearly price of crude oil and the uncertainty in the crude oil trade with respect to the global economy.
    Weldone Madam…..Continue to teach our selfish lawmakers.