Peter Osalor
“Against stupidity, the gods themselves struggle in vain.” Fredrick Von Schiller, 1759-1805. (VANGUARD BOOK OF QUOTATIONS p 235).

On Tuesday, December 17, 2013, the Senate and the Federal House of Representatives finally agreed on
the benchmark price of crude to be used as the basis for calculating the expected revenue for 2014. One enthusiastic Senator was quoted to have said that: “While the Senate agreed to settle for the new benchmark, members of the House of Representatives were persuaded to accept the $77.5 offer.

It is a give and take thing. We at the Senate….upped the benchmark from the initial $76.5 proposed…the House of Representatives have been persuaded to reason with us and come down..”
Anybody reading that statement would imagine that the National Assembly had performed a very difficult feat for which it should be commended instead of wasting everybody’s precious time, like a bunch of idle people for which they should be condemned.

In reality, what they have achieved was a political compromise with no firm basis in economics or the facts with which we are all familiar. Furthermore, they have also harmonized their position which is still at variance with the proposal by the Executive branch – which stands at $73 per barrel.

However, both the National Assembly and the Executive branch in Abuja are united when it comes to one objective – they want to keep the crude oil benchmark low enough in order to continue to generate funds which will end up in the illegal Excess Cruse Account, ECA and the Sovereign Wealth Fund, SWF, which the 36 states of Nigeria are disputing in court.

Frankly speaking pegging the benchmark at $77.50 or $79.50 makes no sense; proposing $73.50 is at best ridiculous; and at worst insane for two very obvious reasons.

“Even God cannot change the past.” Agathon, c447-401 B.C
First, global crude oil prices had remained at over $100 on the average in the last six or seven years. This is a fact which can be verified by the staff of the NASS or individual lawmakers, if only they are alive to their responsibilities.

The past, especially the immediate past, as well as the present and immediate future should weigh heavily in making this sort of decision. Nothing known to man suggests that crude prices will come down as low as even $85 next year. So, why are grown men and women haggling over $79, $76 or $73?

Dr Okonjo-Iweala, of course knows the truth, but she is wedded to raising false alarm about the movement of crude prices in the future in order to swell those two illegal accounts — ECA and SWF – to which she clings like a drunkard clings to a lamp post for support. She knows better than anyone else that there is less than a five per cent chance that the price of crude will fall below $90 per barrel next year – particularly when orders for the first quarter of 2014 had already been placed.

It would require a total collapse of the world’s largest twenty five economies in 2014 for crude prices to plummet to $80 per barrel. The Finance Minister knows this, but she also has a personal agenda which abhors the truth about the future trend of crude prices.

Obviously, what is being trumpeted as a triumph of reason is nothing more than self-deception by the NASS. At the very least, they have ensured that there will be nothing less than $20 per barrel of crude sold next year and that means that the nation will continue to maintain the illegal ECA, controlled by the Federal government, instead of paying all the proceeds into the Federation Account to be distributed to all the tiers of government according to the sharing formula agreed.

In other words, the Federal government which had amply demonstrated its inability to safeguard its own funds from the human termites in government and the civil service will continue to be the custodian of funds belonging to the 36 states, the Federal Capital Territory and all the Local Governments.

At the moment, the price of Brent is close to $109 and nothing in the international horizon suggests that any shock to the supply system will drive it below $100  in the next three or four months.
Clearly, there is no objective basis for this ridiculous decision for which the Senate wants to claim credit.