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House committee raises fears over falling oil prices

By on November 8, 2014

The House of Representatives Committee on Finance on Thursday raised concerns over the continuous fall of crude oil prices.

The committee said it might advise the House to return the 2015-2017 Medium Term Expenditure Framework and the Fiscal Strategy Paper to President Goodluck Jonathan for review in line with “the present realities.”

The MTEF/FSP outlines the revenue projections and spending pattern of the Federal Government for the next three years, beginning with the 2015 budget.

The Chairman of the committee, Mr. Abdulmumin Jibrin, who gave this hint during a visit to the Nigeria Sovereign Investment Authority’s office in Abuja, noted that at a time like this, the country must encourage savings for the challenging days ahead.

Crude prices have dropped to around $82 per barrel lately from around $110 some months back.

Incidentally, Jonathan had pegged the crude oil benchmark of the 2015 budget at $78 per barrel, slightly up from the $77.5 the National Assembly approved for the 2014 budget.

But, Jibrin observed that with the free fall of crude prices, there was now the need to conserve funds and support the NSIA to deliver on its responsibilities of investing for the rainy days.

He explained, “The House is returning the MTEF to the Executive arm of government so that the government will re-present it properly, with attention paid to more savings so that agencies like the NSIA can be better supported.

“Everything was good when crude was selling at $110, not now when it is free falling. We want to see how the situation can be mitigated. We are aware that you are faced with two critical challenges of the legal instrument setting you up and your need for more funding.”

The Managing Director, NSIA, Mr. Uche Orji, earlier raised similar fears about the falling crude prices.

He pleaded with the committee for adequate funding of the agency to perform its statutory responsibilities.

He said, “The effect of oil price risk is not for the NSIA alone, but for the whole country. Oil price will be volatile at, say $100 per barrel, but it will also get to a point where new contracts will get out.

“This reduction will discourage others; and at a point, it will go away.”

Jibrin’s latest position was a U-turn on that taken by the House a few weeks back that the oil price dip would not affect the budget.

Speaking on the matter then, the House spokesman, Mr. Zakari Mohammed, had insisted that the budget was still safe at a benchmark of $78 per barrel of crude.

“There will be no problem for the budget; the crude oil price is still far above the benchmark proposal. There should really be nothing to panic about regarding next year’s budget,” Mohammed had told The PUNCH in an earlier interview.

The crude oil benchmark has frequently caused a row between the Executive and the National Assembly.

Last year, the two sides dragged the issue for months before they finally settled at $77.5 per barrel.