The politics of budget oil benchmark

20 December 2015, Abuja – It is gratifying that the Senate, true to the promise of its President, Bukola Saraki, has decided to speedily work on the Medium Term Expenditure Framework (MTEF) presented to the upper legislative body by President Muhammadu Buhari a fortnight ago.

Bukola Saraki, Senate President of the Federal Republic of Nigeria.

Bukola Saraki, Senate President

Under Nigerian public finance system, the MTEF is the precursor to the budget, as well as Fiscal Strategy Paper (FSP), which details spending and revenue projections for three years (2016-2018).

One feature of the budget is President Buhari’s realistic projections, upon which the budget is based. For instance, the oil benchmark price is put at $38 per barrel, while a daily crude oil production of 2.2 million barrels was projected in the framework.

Other highlights include the N500 billion for the implementation of its social security scheme for unemployed young graduates under the 2016-2017 Medium Term Expenditure Framework (MTEF) and Fiscal Policy Strategy (FPS) submitted to the National Assembly on Tuesday.

However, one might say that the Senate is not ready for the change, which Nigerians have been yearning for. This is because at the Senate plenary Wednesday, lawmakers differed on the $38 per barrel benchmark projected as the price of crude oil, the mainstay of the Nigerian economy.

The Deputy Senate President, Ike Ekweremadu, who is the face of opposition in the Senate wants the oil price benchmark to be pushed to between $40 and $45 per barrel, arguing that the $38 price tag was too conservative. But we don’t need to be a first grade economist to realise the danger in such an unrealistic assumption especially in a period when the global economic community is feeling the impact of a regime of sustained tumbling of crude oil price. Unlike some other oil producing countries, Nigeria has not been able to effectively manage its oil resources and this has continued to make the nation vulnerable to all the recent contradictions in the international oil market.

I think we should pardon Ekweremadu for this suicidal mission. Given the kind of opposition being offered by the Peoples Democratic Party since the party was voted out of power earlier in the year, one will not be surprised that a deputy senate president, could urge Nigeria to take a dangerous plunge in a critical time like this when the global oil market is at the mercy of the ongoing international politics between Organisation of Petroleum Exporting Countries  (OPEC) and non-member nations.

But I don’t pity the All Progressives Congress-controlled Senate for Ekweremadu’s attempt to throw spanners in the work of 2016 budget. It is nothing but the fallout of their inability to put their house in order during the election of principal officials of the house.

One can only hope that the 2016 budget will not be held down by unrealistic expectations, which will at the end of the day make the budget preparation a wasteful exercise.

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