08 March 2016, Lagos— Global crude oil prices finally surpassed Nigeria’s budget benchmark, yesterday, trading above $39 per barrels.
This came as experts on the economy have cautioned the Federal Government to be frugal with the revenue accruing from the rise in oil price, so as to steer the country from the current economic downturn.
The price of Brent crude, the global oil benchmark, rose to an all-year high of $39.50 on yesterday, from $27.10 on January 20, the lowest for Brent in 2016.
The price of Nigeria’s crude has not been quoted by the Central Bank of Nigeria (CBN), but sources say the price may surge to the budget benchmark region of $38.
Nigeria’s 2016 budget was benchmarked at $38 per barrel against major criticism across the nation, following December 2015 prices of about $34 per barrel.
Experts caution Wilifred Iyiegbuniwe, professor of finance at the University of Lagos, said though the increase will have a positive impact because the inflow of foreign currency will improve, the benchmark should not be reviewed.
He said: “Any recovery of the oil proceeds should go to a special fund. The economic team and the Federal Government should determine what should be done with it.
“Such excess revenue should be used to diversify the economy into such areas as agriculture, solid minerals and manufacturing. However, the benchmark should not be reviewed.”
Also, Henry Boyo, an economist, said: “What happened every time the price was high above the benchmark? Was there greater employment? Was there relief in exchange rate? Was there improved productivity? We should think collectively as Nigerians, who are stakeholders in the polity.”
Udoma Udo Udoma, Minister for National Planning, had initially said low crude oil prices would not affect the 2016 budget, insisting that the budget is achievable.
“Our budget is achievable; we have ongoing reforms targeted at diversifying our revenue base away from single oil commodity economy,” Udoma said in January. A week ago, Udoma said the country may have to review the budget benchmark as early as June, based on the recurrently low crude oil prices.
“The benchmark of $38 per barrel of price of oil is not sacrosanct because of the subsisting global environment,” he had said. “If at mid-year there is no improvement, we will come back to you for mid-term review. The review may come as quickly as June this year.”