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Fiscal commission kicks against $73 oil benchmark

By on November 22, 2014

Against the backdrop of falling oil prices, the Fiscal Responsibility Commission has kicked against the proposal to set the 2015 budget benchmark for crude oil at $73 per barrel.

Addressing a press conference in Abuja on Thursday, the Acting Chairman of the FRC, Chief Victor Murako, said the Federal Government should be more realistic and set the benchmark at $60 per barrel.

He said instead of adopting the average as the method for arriving at the benchmark, the Federal Government should consider an approach that would determine savings accruable to the Excess Crude Account.

He also advised the three tiers of government against depleting savings that had accrued in the ECA, adding that the times called for more savings rather than sharing what had been saved in the past.

The FRC boss said, “It should be noted that the oil slump has more than anything else, emphasised the need for more prudence and fiscal responsibility best practices on the part of the three tiers of government.

“Given the fact there may be no immediate end in sight to the oil price slump, there is a need for the Federal Government to take a much lower and conservative oil benchmark price of about $60 per barrel rather than the proposed $73 per barrel to guard against all eventualities.

“While we appreciate the use of moving average of international oil price to determine the benchmark oil price in Nigeria, no time is more appropriate than now to revisit the method and come up with a more realistic approach.”

He added, “Since 2008, the average savings into the ECA was an average of $31,6 per barrel. The savings per barrel of oil into the ECA on annual basis were 2008 – $42.1; 2009 – $18.9; 2010 – $30.9; 2011 – $34; 2012 – $31.8; and 2013 – $31.8. This gave an average savings of $31.6 over the six-year period.”

According to him, the benchmark price of oil should be the difference between the forecast average international price of oil and the predetermined savings into ECA.

Murako said the Federal Government would do well to plug leakages in the economy by giving due consideration to internally generated revenue.

He added that all institutions should wake to their responsibilities by complying with the law and remitting their internally generated revenues as and when due.

 

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