A Review of the Nigerian Energy Industry

Falling oil prices: Nigeria seeks reduction of 2015 budget by N235bn

SenateOscarline Onwuemenyi

20 November 2014, Sweetcrude, ABUJA –
President Goodluck Jonathan on Wednesday proposed an immediate review of the parameters upon which the 2015 budget would be based due to slide in oil prices.

The President’s proposal was contained in a revised Medium Term Expenditure Framework and Fiscal Strategy Paper forwarded to the Senate yesterday for consideration and subsequent approval.

According to the letter, the administration is proposing a total expenditure profile of N4.661 trillion for the 2015 budget estimates as against N4.817 earlier proposed, indicating a reduction of about N235billion.

Also, in the latest proposal, $73 per barrel is fixed as oil price benchmark as against $78 earlier proposed.

A slight change is also effected in the exchange rate as one of the key parameters upon which the budget would be based, while in the MTEF & FSP document earlier forwarded, N160 to a US dollar was proposed as exchange rate, N162 to a US dollar is proposed in the latest document.

Jonathan had in an earlier letter forwarded to the National Assembly in September, containing the 2015- 2017 Medium Term Expenditure Framework and Fiscal Strategy Paper (MTEF & FSP), proposed a total expenditure profile of N4.817 trillion as the 2015 estimates with $78 as oil benchmark, oil production of 2.2782 million barrel per day and N160 to a dollar as average exchange rate.

But The N235 billion shortfall in the latest proposed total expenditure profile arose from cuts effected from critical areas like SURE-P which had N259billion earlier earmarked for its capital expenditure but reduced to N184billion in the latest proposal.

Others are the MDAs capital expenditure, earlier estimated for N1.029trillion but now reduced to N872billion Ditto for subsidies for petroleum and kerosenes reduced in billions from earlier proposals made.

The President’s letter for the new proposals titled: “Submission of Revised 2015-2017 Medium -Term Expenditure Framework”, reads in part: “As you may recall, I had transmitted the 2015-2017 Medium Term Expenditure Framework and Fiscal Strategy Paper (MTEF&FSP) to the National Assembly for consideration and approval.”

However, he said, recent developments in the international oil market have necessitated that NTEF be revised.

“Consequently, following further consultations with key stakeholders, adjustments have been made to some of the key parameters as well as to some fiscal estimates in the MTEF. I hereby forward copies of the revised 2015-2017 MTEF to the National Assembly, and hope that it will receive your kind expeditious consideration in order to bring the 2015 FGN Budget preparation process to quick closure.”

The Minister of Finance, Dr.Ngozi Okonjo-Iweala, had at a briefing on Sunday given indication of a review of the country’s crude oil benchmark – proposing $73 per barrel as against the current $78 per barrel earlier input in the 2015 budget proposal.

She explained that the action had become necessary against the backdrop of backward trend of the crude oil prices in the global market.

Dr. Okonjo-Iweala, explained that the emerging trend in the global oil market which put at about $74 barrel per barrel as at last Friday and the initiative about to taken by the government was to revise the Medium Term Expenditure Framework, (MTEF) as well as safeguard the Nigerian economy.

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