Oil price: Senators split over 2016 budget

21 January 2016, Abuja—Senators were, yesterday, sharply divided along party lines on the feasibility of the 2016 Budget on many counts, especially the oil price benchmark of $38 per barrel as they began debate on the Appropriation Bill presented to them by President Muhammadu Buhari.

*Senate Chamber of Nigeria's national assembly.

*Senate Chamber of Nigeria’s national assembly.

While senators elected on the platform of the ruling All Progressives Congress, APC, hailed the proposal and said it could put the country on the path of socio-economic recovery and growth, their Peoples Democratic Party, PDP, colleagues picked holes in the budget, describing it as far from the envisaged change mantra of the government.

Speaking at the plenary, some APC senators argued that the budget was geared towards fighting corruption and diversification of the economy. But others, especially of the PDP described the budget as dead on arrival and should be returned to the President for amendment as they called for a reduction of the budget by 30 per cent and a downward review of the oil benchmark.

Buhari’s proposal
President Buhari had on December 22, 2015 presented a total budget of N6.08 trillion for 2016 to a joint session of the National Assembly. He disclosed that 30 per cent of Nigeria’s annual budget will be committed to capital expenditure and moved Capital Expenditure from N557 billion in 2015 to N1.8 trillion in the 2016 budget. He added that having reviewed the trends in the global oil industry, the government decided to set a benchmark price of $38 per barrel and a production estimate of 2.2 million barrels per day for 2016, with plans to focus on non-oil revenues by broadening the nation’s tax base and improving the effectiveness of revenue collecting agencies.

In the budget, President Buhari, who projected a revenue target of N3.86 trillion for 2016, and recurrent expenditure of N2.43 trillion, said that the Federal Government also proposed to spend the sum of N1.66 trillion for foreign and domestic debt servicing while projecting to actualize the sum of N1.4 trillion as expected non-oil revenue. To fund the budget, government projected foreign and domestic borrowing of N900 billion and N986 billion respectively.
In his lead debate, Senate leader, Senator Ali Ndume who noted that the bill has been divided into eight sections to help the lawmakers, said, the budget is unique and titled Budget of Change.”

He said the budget preparation was based on Zero Based Budgeting, ZBB system, which requires all expenses on projects and programmes to be fully justified by MDAs.

He continued: “The Budget is aimed at promoting inclusive growth including the poor and the vulnerable, however, it would be challenged by the decline in oil prices and slowdown in the global economy.

“The 2016 Budget is designed to ensure that the economy is revived; deliver inclusive growth to Nigerians and create a significant number of jobs. The budget seeks to stimulate the economy, making it more competitive by focusing on infrastructural development; address immediate problem of youth unemployment and under employment, prioritizing the welfare of Nigerians; focus on broadening the tax base and improving the effectiveness of revenue collection, as well as ensuring macro-economic stability and managing the oil price shocks. The 2016 Budget is aimed at diversifying the economy and moving away from dependence on oil.”

Withdraw budget for amendment— Abaribe
In his contribution, Senator Eyinnaya Abaribe, PDP, Abia South, faulted the 2016 budget proposal and described it as dead on arrival. He called on President Buhari to, as a matter of urgency, withdraw it and go back to the drawing board, adding that predication of the budget on oil benchmark of $38 per barrel when oil prices had fallen below $30 per barrel makes the budget unrealistic.

His words: “Mr President, my colleagues, this budget is indeed unique, after the budget presentation, the Finance Minister has never come to explain the details of the budget as it is normally done. It is a budget of change, I agree, but it is a change in the wrong direction. I say it is a change in the wrong direction because it says that it is based on zero budgeting requiring all expenses to be fully justified.”

Faulting the government for increasing spending by 30 per cent based on borrowing, he said a budget that increases spending up to 30 per cent based solely on borrowing cannot be justified. We know what is going on in the global economy. This budget is predicated on an oil benchmark of $38 per barrel and I can now say that with oil being $28 today, this budget is dead on arrival.”

Corruption has remained Nigeria’s problem —Lawan
Ahmed Lawan, APC, Yobe North, however, took a swipe at the previous administration for lack of funds because of alleged embezzlement and corruption.
According to him, “the problem was and has always been corruption. For 16 years, Nigeria was subjected to impunity.” He added that this is the first time that a budget is not depending on oil and that it is an opportunity for the present administration to diversify the economy.

Senator Ahmed, who noted that not more than 40 per cent implementation was achieved in any budget in the last 16 years, said: “The proposal before us is the first budget where the executive has deemed it necessary to give ordinary Nigerians genuine hope. The budget deserves the support of everyone including my colleagues on the other side. When we were in the opposition, we supported the PDP, they should support us.”

Buhari should constitute a strong economic team – Aduda
Senator Philip Aduda, PDP, FCT, who described the N37 billion allocation for the Federal Capital Territory as unrealistic, however, called on President Buhari to as a matter of urgency, put in place a very strong economic team that will help move the country forward. Aduda warned the APC senators against accusing and blaming the PDP, noting that majority of the senators, including Senate President Bukola Saraki were all in the PDP.

We are now baking the cake, not sharing —Omoworare
Senator Babajide Omoworare, APC, Osun East, said for the first time, the nation’s budget was not concentrating on sharing the national cake, but on baking the cake. He described it as the most beautiful budget he had seen since he became a senator and stressed the need for the government to block all leakages.

Some proposals not realizable – Ashafa
Senator Olugbenga Ashafa, APC, Lagos East, lamented that some beautiful proposals in the budget might not be realized unless a supplementary budget was brought by the President.

“Where is the money for recruiting and training 500,000 teachers going to come from? Is it going to come from states, which cannot pay salaries? It is also good that we are proposing to pay N5,000 to unemployed youths, how are we going to raise the funds?” Ashafa wondered.

It is budget of fraud – Nwaoboshi
Senator Peter Nwaoboshi, PDP, Delta North, described the budget as that of nothing but fraud. He observed that some pages of the budget were missing and accused President Buhari of injecting sectional interest above national interest.

Arguing that the contents were tilted in favour of the North, Nwaoboshi said that he has written an objection to its passage to the National Assembly, which he would send through the Senate Committee on Appropriation.

He particularly picked holes in the allocation of N35 billion for exploration of oil in the North as against the N20 billion and N40 billion for the Presidential Amnesty Programme and the Niger Delta Development Commission, NDDC.

Nwaoboshi said: “This budget is a fraud. It is a fraud because it is not predicated on the right oil price. The lead debate today by the leader of the Senate, wasn’t fair when he said that N500 million was made for intervention. I want to refer you to page 7 of the document which has to do with the estimate. First, in that document, so many portions are missing. Look at it, you cannot find 191,195,197,198, 200 and 2001 in this budget and it’s suspect. What do they want that they tactically avoided to fill into these sections?

“If you look at the budget of NDDC, this National Assembly made a law and in the law, the funding of NDDC is well spelt out on how NDDC will be funded. It said 70 per cent of its revenue and what we have here in this budget is N41 billion. What is the monthly revenue as provided for in the NDDC Act and then you calculate what you are going to give to the states, the nine states that make up the oil producing areas. It is not a question that you sit down in your office, sit down in your house and you appropriate N40 billion. This is the law made by this House, a law made by the National Assembly must be obeyed. And we are the people who made this law, we must make sure that we protect the law that we make in this chamber.”‘

Reduce the budget by 30% – Ekweremadu
Deputy Senate President, Senator Ike Ekweremadu, called for a reduction of the budget by 30 per cent. He also called for equitable distribution of resources and projects across the country, just as he urged the government to reduce the cost of governance and concentrate on existing projects.

Ekweremadu said: “I am not an economist but I know that if my income is N100,000 and suddenly I start earning N30,000 and I tell my children that we will now be spending N120,000, they will start wondering where I will get the money.

The problem we have is that over the years, we have seen prosperity and we have adjusted to it and now we are seeing a downward trend in our revenue, we don’t seem to be addressing this issue.

“We have always increased the budget of this country from between 10 and 20 per cent. I just want to appeal that for the first time, we should be able to reduce that budget by the same 20 to 30 per cent. That is in order for us to be realistic, otherwise it will not be implementable.

“I am aware that during the great recession in America, they had to inflate the economy by doing more projects. We are in recession whether we like it or not. They did not go to borrow money, people had to make sacrifices; so I appeal that instead of financing the deficit through borrowing and mortgaging the future, we need to look inwards and raise the money. I believe that as we look at the spending side, we have to look at the revenue side. We have not been creative enough to raise money to run this country.

“We need to begin to reduce the cost of running government, so that we can be able to afford the government which we deserve. I also believe that looking at the budget, we need to concentrate more on on-going projects rather than starting new projects.”

Borrowing to finance budget, dangerous – Adokwe
Senator Suleiman Adokwe PDP, Nasarawa South, warned against borrowing to service the budget, saying that it would portend danger to the country and the economy.

He said: “Industrialists prefer tax holidays so that they can use the profit to employ more, while welfarists believe that if you tax more, you will pay more people and more people will go to work. And more production will be achieved. But we are not doing any of these two, we are simply going to borrow and give more. If you just borrow to provide welfare, it does not provide economic growth in any way; people will just eat and go to sleep. But if you are borrowing to invest in productive resources that will generate more income, then you know that you are borrowing for a good purpose. This matter of borrowing to fund the budget must be looked at very critically, otherwise we will be digging more into economic problems than we bargained for.”

Oil price benchmark must be reduced – Enoh
Chairman, Senate Committee on Finance, Senator John Enoh, PDP, Cross River Central, called on the Senate to ensure a downward review of price of oil benchmark. He also stressed the need for the exchange rate to be looked into. “Now going into the real statistics, this budget is based on assumptions. And there are a few assumptions that we must look at. For the first time in about 17 years, the National Assembly may now have to take a decision about the downward review of the oil price benchmark. I’m not too sure when this budget is going to be passed but I think we need to be careful and look at what the market price of oil is going to be at the time that this budget is going to be passed.”

The Presidency should review the budget proposals – Barau
Senator Jibrin Barau, APC-Kano North, called for amendment of the budget proposal either by the presidency or the National Assembly to meet the economic realities of the time, saying that the reality on ground is that the $38 oil benchmark proposed in the budget proposal was unrealistic in view of the fact that it had dropped to as low as $ 28 per barrel and might plunge further.

There should be faithful implementation – Adeola
Senator Solomon Adeola, APC, Lagos West, however, called for judicious implementation of the 2016 budget, just as he hailed the Federal Government for presenting a budget that breaks away from the past and addressed issues of development in view of the dire economic straits that Nigeria found itself with dwindling oil prices and fall in the value of the Naira.

Senator Adeola noted that in previous years under former administrations, the benchmark of crude oil at $120 per barrel usually got us a budget which size was less than N5 trillion but with the low bench mark of $38 per barrel under an APC-led government, the budget is over N6 trillion. He said that the indications are that the budget is not to be majorly funded from crude oil sales but from other sources.

Senator Adeola specifically commended the inclusion of N300billion social intervention fund with N16 billion for small scale enterprises and farmers in the budget, urging however that the government must ensure it does not go the way of SURE-P that went into private pockets. He urged that relevant committees of the Senate must adequately oversight the social intervention fund.

 

 

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