By Luka Binniyat
ABUJA — The House of Representatives and the Federal Government, yesterday, disagreed over the $65 per barrel benchmark provided for in the 2011 Appropriation Bill.
However, both the Federal Government and the House agreed that there was need to raise additional N300 billion to close some gap in the N1.38 trillion deficit in the 2011 budget, so that the borrowings would mainly be for capital expenditure.
December last year, President Jonathan Goodluck presented to the National Assembly, a deficit budget of N4.226 trillion which was also N933 billion (18%) less than the N5.1599 trillion budget of 2010. According to the revenue forecast, the Federal Government would earn a total of N2.836 trillion while planning to spend N4.226 trillion leaving a deficit N1.39 billion, which represents 3.62% of GDP
In spite of the controversies generated by excessive, successive recurrent budgets, the structure of the 2011 budget still tilts heavily towards the recurrent as it takes N2.481 trillion, while only N1 trillion has been earmarked for capital expenditure.
The 2011 budget is predicated on an oil benchmark of $65 per barrel at a production output of 2.3 million barrel per day. It predicted a stable exchange rate of N150 to the US dollar, with a Gross Domestic Product (GDP) of 7 per cent.
The House of Representatives Committee on Finance, chaired by Mr. John Eno (PDP/Cross River) at a fact-finding meeting with the Director General, Budget Office of the Federation, Dr. Bright Okogu and statutory corporations and agencies of government, strongly objected the $65 per barrel benchmark, saying prevailing global issues have kept the average price of crude oil hovering around $90 dollars in the past months and still rising.
“What happened last year was that we agreed on a benchmark $57 dollar, but oil sold for over $80. The result was that all the extra money went into the Excess Crude Account, which the three tiers of government, like in other years, flagrantly shared among themselves without the National Assembly appropriating it”, he said.
“That means you took almost what was Appropriated without authorisation, even when we had funding gaps last year”, he said.
“What has the Federal Government got to lose if it raises the benchmark by say, $3 or $4 dollars so that we capture more into the budget? We are not going to let you go without a strong commitment that you would adjust the benchmark higher”, he told the DG.
But, Okogu said that government arrived at that benchmark after and exhaustive consultation with all stakeholders in the global industry and warned that adjusting it higher could portend grave problems for the budget.
“The oil market is very, very volatile and dangeroulsly unpredictable”, he said.
“We look a bit comfortable at $65. We can only adjust lower”, he said.
“Even Gulf states that produce more oil, have never used a benchmark of more than $50 in the past two years. And their access money is still being used for the benefit of their people.
“We believe that the Sovereign Wealth Fund Bill would passed into law by the National Assembly so that all excess money from our estimation in the budget, would be put there and not shared again”, he said.
After long a long debate on the issue, he stuck to his ground that the benchmark of $65 was the best. However, the two sides agreed that it was wrong to borrow in order to finance overhead expenditure.
They agreed that, since the capital expenditure for 2011 is N1 trillion, the deficit should remain at N1 trillion, hence the need to raise and extra_revenue of at least N300 billion to take care of overhead.
“You don’t borrow to buy consumable, you borrow for capital projects”, said Eno.
“We are carrying out a forensic audit of the Nigerian National Petroleum Corporation (NNPC) and we have been meeting with other heavy revenue earners outside the oil sector. We believe that we should be able to realise more revenue to fund the budget”, said Okogu.
To this, Eno expressed his dissatisfaction to the effort.
“In the budget you said that the Nigerian Customs Service is expected to generate N450 billion. Why can’t you challenge them to raise, say, N500 billion. Look at the Nigerian Ports Authority, and others”, he said.
The Committee was meeting with Federal Inland Revenue Service (FIRS), the Nigerian Telecommunication Commission (NCC); the Accountant General of the Federation, the Central Bank of Nigeria (CBN) and others at the time of going to Press. The aim of the meeting was to ascertain the revenue and expenditure profile of each of the government organs with the view of calculating how much they can remit into government coffers to finance the 2011 budget.