Optimistic FG Retains $65 Oil Benchmark, Presents N4.3tn Budget Today

The Coordinating Minister for the Economy and Minister of Finance Dr. Ngozi Okonjo-Iweala will today lay the 2015 budget estimates of N4.357 trillion before both chambers of the National Assembly. According to a letter addressed to the Senate President, David Mark, and Speaker of the House of Representatives, Hon. Aminu Tambuwal, by President Goodluck Jonathan, the budget will be laid by the minister in accordance with Section 81(1) of the 1999 Constitution, as amended. However, despite tumbling oil prices, the federal government optimistically stuck to the $65 per barrel oil benchmark proposed for the 2015 budget as contained in the Medium Term Expenditure Framework (MTEF), which it re-submitted to the Senate on December 2. The government had reviewed the oil benchmark from the earlier proposed $78 to $73 per barrel on November 18, but owing to the continuous drop in oil prices, the government further reduced the benchmark to $65 as contained in the second revised MTEF submitted on December 2. Jonathan in his letter yesterday, explained that the executive had resolved not to further review the oil benchmark downwards despite the further drop of oil prices below the proposed $65 per barrel benchmark, saying there were indications that the price may range between $65 and $70 in 2015. He however added that should the price fall below this projection, "the country would have to make further adjustments”. Nevertheless, in the newest MTEF submitted to the National Assembly yesterday, the executive reduced the 2015 budget projections from the N4.661 trillion it submitted on December 2 to N4.357 trillion. It also raised the foreign exchange rate from N160 to $1 proposed earlier to $165 to $1. The last document had contained N4.661 trillion budget for 2015, which was meant to be predicated on $73 per barrel oil benchmark and a foreign exchange of N162 to the dollar as against the initial proposal of $78 per barrel benchmark and an exchange rate of N160 to the dollar. However, while the executive retained the N2.622 trillion recurrent expenditure it proposed in the last MTEF, it slashed the capital expenditure by almost half in the latest document, reducing it from the N1.208 trillion proposed in its revised MTEF to as low as N627 billion, implying that there will be dearth of capital projects in the country next year. The executive had on September 30, first proposed N1.436 trillion before reducing it to N1.208 trillion. It also reduced the Subsidy Reinvestment and Empowerment Project (SURE-P) estimate from N184 billion to N102 billion. It had proposed N259 billion in the first MTEF. While the document retained the projection of 2.2782 million barrels per day for crude oil production, it reduced its kerosene subsidy from N156 billion projection to N91 billion, while it put the revenue target at N3.602 trillion. Meanwhile, ahead of the budget’s presentation, the House speaker and other principal officers of the lower legislature held a two-hour session with the finance minister. 

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