* Adopts $57pb oil benchmark
*Benchmark target threatened as oil price continues to slide
*Reduces borrowing by N200bn to N1.5trn
By Henry Umoru, Levinus Nwabughiogu & Prince Okafor
THE National Assembly has cleared the way for the presentation of the 2020 budget by President Muhammadu Buhari by approving the 2022 Medium Term Expenditure Framework, MTEF, and Fiscal Strategy Paper, FSP submitted by the president, last week.
In two separate approvals both chambers of the federal legislature okayed the recommendations in the documents and jerked up the value of the country’s 2020 budget outline by N729 billion from N10.002 trillion to N10.7294 trillion based on expectations of higher oil prices.
The lawmakers adopted $57 as the benchmark price for a barrel of oil in the international market. They also adopted N305 per dollar as the official exchange rate and production of 2.18 million barrels of crude oil per day.
Meanwhile, the $57 adopted by the legislature is already threatened as the price of Oil slipped further below 58 dollars a barrel yesterday, pressured by concerns about global economic growth, oil demand and signs of excess supply, despite OPEC-led cuts.
The 2020 MTEF approved by the lawmakers pegged oil production at 2.18 million barrels per day (bpd), with the country currently producing at roughly that level, though it had pledged to cut it meet an OPEC cap on crude oil of 1.685 million bpd.
After considering the reports of the respective committees on finance and appropriations, both legislative chambers also approved N1.5 trillion as the amount for new borrowing in 2020. They said this is as a result of the reduction of N200 billion which was sourced from the increase of revenue target of the Nigeria Customs Service.
The legislature said that the adoption of 2.18 million barrels as daily production output in 2020 was realisable “in view of a concerted effort by NNPC and security agencies to combat the menaces of oil theft and vandalisation.”
They also asked the Debt Management Office (DMO) to put more efforts and strategies in managing the foreign and local debts.
Other resolutions passed by NASS include: Increase of the revenue target of Nigeria Customs Service (NCS) for 2020 from N942.6 billion to N1.5 trillion. Use of N557.4 billion from the revenue increment of customs to reduce borrowing by N200 billion and increase capital expenditure. The committee said this would, in turn, decrease the size of the budget deficit from N1.7 trillion to N1.5 trillion and also increase the total capital available to MDAs by N357 billion, from N1.01 trillion to N1.367 trillion.
They also resolved that 1% of the consolidated revenue fund be earmarked to finance the basic healthcare provision fund to be classified as a statutory transfer.
In the meantime, crude oil price yesterday dip 26 cents to $57.43 per barrel after tumbling two per cent in the previous session, following global economic growth, oil demand and signs of excess supply.
This is in spite of a call for a production cut by the Organisation of Petroleum Exporting countries (OPEC).
Commenting on the implications of this development, Chairman of Petroleum Technology Association of Nigeria (PETAN), Bank-Anthony Okoroafor, said: “The implication means less money coming into the federal government account. Also, the subsidy the federal government will be paying will be less, because refined products prices will be less, revenue coming to the government from crude sales will be less.
This will also affect major projects because people are scared of investing at low oil price. There is supply from several sources.
Basically, consumption is low, the US is producing more and they are even cheaper, so supply is more than demand and from the natural economy, the price will go down.