LCCI seeks reduction of oil benchmark price to $40

Kunle Kalejaye 22 January 2015, Sweetcrude, Lagos – The Lagos Chamber of Commerce and Industry, LCCI, has proposed an oil price benchmark of between $40 and $45 per barrel for the Nigeria’s 2015 budget, saying the $65 per barrel price proposed by the government was too optimistic given the current reality of the global oil market.

Oil prices drop

Oil prices drop

In his presentation at a press conference on ‘the 2015 Appropriation Bill of the Federal Government and the Current Economic Situation’, Alhaji Remi Bello, president of the chamber, said, “The fundamentals of supply and demand in the oil market cannot support this benchmark in the short-to-medium term; currently it (price) is at less than $50 per barrel.

“Ideally, the benchmark should be significantly below the actual price in other to create room for possible savings and adjustments for volatility shocks.”

Similarly, he said the oil production benchmark of 2.278 million barrels per day prescribed in the Appropriation Bill was also optimistic having regard to the persistent oil theft which had continued unabated in recent years.

“The quantity of oil theft has been estimated at about 400,000 barrels per day. There is also the divestment by the major oil companies and sluggish investment in exploration as a result of policy uncertainties and security concerns.

“In recent years oil output has ranged between 1.8million and 2 million barrels per day. The oil production benchmark should therefore be guided by this experience,” he said.

Bello described the appropriation for petroleum subsidy as the biggest burden on government treasury in the country with N200 billion proposed as subsidy for PMS (petrol) in 2015, down by 80 per cent from N971 billion in 2014.

While welcoming this development, he noted that the provision of N91 billion for kerosene subsidy in 2015 was difficult to justify.

“Besides the global oil price dropping to below $50 per barrel, there is no longer any justification for budgetary provisions for petroleum products subsidy.

“We urge the National Assembly to take this into account in its deliberations on the 2015 Appropriation Bill. Times like these call for utmost prudence and curbing of leakages,” he said.

On appropriation for debt service, he said, “We are deeply concerned over the growing budgetary appropriation for debt service. The amount has grown from N712 billion in 2014 to N943 billion in 2015.

About the Author