2014 Budget: ‘Oil Benchmark Reduced To Save For Rainy Day’

Director-General, Budget
Office of the Federation, Dr Bright Okogu, last Monday said the reduction in oil benchmark in the 2014 budget was deliberately made to save for the rainy day.
Okogwu stated this in Abuja during the public presentation of the 2014 federal budget by the Minister of Finance and the Coordinating Minister of the Economy, Dr Ngozi Okonjo-Iweala.
Our correspondent reports that 78 dollars per barrel crude oil benchmark for the 2013 budget was reduced to 77.7 dollars for the 2014 budget at 2.38 million barrels per day production.
Okogwu said that there was need for the country to have independent way of determining the oil benchmark to set a foundation for the future budget.
“We will like to draw attention to the fact that 110 dollars per barrel is not what you can regard as the best price, but we hope it is.
“While hoping, we need to plan properly and that is the basis for asking for a prudent benchmark oil price so that we can save for the rainy day.
“What I am saying is that the market is very volatile; it is unpredictable and the sensible policy option available to any country of this kind is to prepare for the rainy day,” he said.
“I fully agree with the proposal and idea that we need to have an independent way by which we can determine the benchmark price.
“This is necessary so that it becomes, not a source of acrimony, but something that could set the foundation for our future budgets,” he said.
Okogu said that experience and the current trend in the oil market had taught the lesson that the country needed to prepare measures to enable it to cushion the effect of any drop in price of oil.
“For so many years, the price of oil has been wallowing very low; what you are seeing today, don’t take it to mean that forever and ever, this is what the oil price will be.
“At a time in the past in the 70s when we followed what was called ‘pro-cyclical spending pattern’, the price was high and we spent everything.
“When the price went down, we had no choice than to basically sit on the floor.
“By superimposing the performance of Gross Domestic Product (GDP) growth, we can actually see that the years when proper reforms were done also coincided with the year when we had GDP growth in this country.
“It is not by accident because if you have no cushion, when the price collapses, all your capital projects will be abandoned, sometimes you cannot even pay salaries and that is bad for development,” he said.
The director-general also pointed out that there was a rise in global oil output, adding that many countries were becoming oil producing nations.