Towards Realistic Oil Benchmark For 2015 Budget

When on December 16, last year, the
Presidency forwarded its 2015
Budget estimates to the two chambers of the National Assembly, it recommended $65 per barrel as oil benchmark. That was the third time the budget estimates would be reviewed downwards on account of falling price of the commodity.
The first Medium Term Expenditure Framework (MTEF) had a budget benchmark of $78 a barrel and was submitted to the National Assembly on September 30, 2014. Shortly thereafter, oil prices fell further, leading to a second review of the oil benchmark price in the MTEF to $73 per barrel which was re-submitted to the National Assembly on November 18, 2014.
However, following that, the decision of OPEC at its meeting in Vienna on November 27, 2014 not to cut production to support the price led to further fall in the oil price to below $70 per barrel. That resulted in another downward revision of the benchmark to $65 per barrel and a revised MTEF which was again submitted to the lawmakers on December 2, 2014.
Like the fluctuations that characterized the benchmark, the initial budget proposal also fell from N4.82 trillion to N4.66 trillion. In presenting the proposals, on behalf of President Goodluck Jonathan, the Minister of Finance and Coordinating Minister of the Economy, Dr. Ngosi Okonjo-Iweala expressed the optimism that oil prices would  soon stabilize and range  between US $65 and US $70 a barrel in 2015.
“We would like to confirm that having submitted these budget estimates, we are not proposing further revision of the oil benchmark price. Though prices continue to be extremely volatile at present and to trend further downwards, there are indications based on price intelligence we have at this time that prices may range between  US $65 – US $70 a barrel in 2015,” the minister said.
Strangely however, oil prices slummed to all- time low of below $50 per barrel early 2015, thus making non-sense of the minister’s optimism. And this means that the $65 per barrel benchmark has also become unrealistic as a template for  working on the 2015 budget.
Also, the budget was predicated on an exchange rate of N165 to the Dollar, a speculation that also falls in the face as the Dollar presently exchanges for more than N192. All these make the estimates of the 2015 budget even more unrealistic.
What is required, therefore, is for the Presidency to take another look at the estimates, review them downwards, eliminate possible wastes and come up with more realistic benchmark for oil based on prevailing circumstances. No budget should be based on hope as was the last review.
More importantly, federal and state governments must urgently  consider diversification as a priority and build the necessary framework for the growth and development of the non-oil sector. As it is, a continued dependence on oil and gas would be injurious to both the economy and Nigerians.
We expect that this will be done before the National Assembly resumes plenary to prevent the familiar late passage of our annual budgets.
The 2015 budget must take into cognizance the urgent need to develop necessary infrastructure for the production of refined products from crude oil  and avoid further wastes in the importation of finished products from those who determine the price of our crude.
Budget planners need to consider more resources towards the production of by-products from crude oil for both local consumption and the West Africa  Markets . A country of more than 170 million people is indeed a viable market for such by-products from crude, and should not be ignored.
The country needs to expand its petro-chemical investment and give extra attention to agricultural and tourism development as necessary alternatives to oil. These are the only ways of checking the pinch from the ever sliding price of Nigerian crude oil in the global market.