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Reduce $38 oil benchmark – TUC tells FG

By on December 31, 2015

The Trade Union Congress of Nigeria, Rivers State Council, has highlighted the need for the Federal Government to review downward the $38 per barrel proposed as the benchmark crude oil price for the 2016 budget.

The Chairman, TUC Rivers State, Mr. Chika Onuegbu, who conveyed the union’s “serious concerns about the budget proposal,” said the budget was “laudable and ambitious, but seems unachievable.”

Onuegbu, in a New Year message, a copy of which was made available to our correspondent on Tuesday, said the government should pay serious attention to the concerns “if it intends to implement the budget as planned and realise its laudable objectives.”

He noted that the basket oil price of the Organisation of Petroleum Exporting Countries stood at $32.14 per barrel as of December 24, 2015.

The TUC chairman said, “More worrisome is that some analysts, including the International Monetary Fund, have projected that crude oil will fall to $20 per barrel in 2016. Also, Goldman Sachs insists that the fall in crude oil price will be sustained and oil price will fall to $20 per barrel.

“Anyone who is a keen observer of the events that are shaping the crude oil price will recognise that we are in for a sustained low crude oil price regime. Accordingly, it is doubtful if the budgeted oil revenue of N820bn will be realised in 2016. If the budgeted oil revenue is not realised, this will negatively impact on the 2016 budget performance.

“It is, therefore, important that the government begins to make contingency arrangements should the crude oil price fall below the benchmark price or better still, review the benchmark oil price downwards.”

According to him, the major challenge with budgets in Nigeria is poor implementation. The budget performance history shows that while the recurrent expenditure aspect of the budget usually witness over-performance, the capital expenditure aspect is usually, as is often the case, under-achieved.

The union said the Federal Government should provide a believable plan on how it intends to achieve the budgeted amount for non-oil revenue, otherwise, it should put in place credible contingency plans to avoid severe budget underperformance.

Onuegbu said, “The Federal Government plans to raise the sum of N1.5tn from independent revenue sources. We need to know where these independent revenue sources will come from as the 2016 budgeted figure represent 208 per cent of the 2015 budgeted figure of N489bn.

“The Federal Government revenue projections for oil revenue, non-oil revenue (non-oil taxes) and independent revenue sources are very ambitious. They come with the risk that they may most likely be unachievable. If they become unachievable, then the planned expenditure, especially the planned N1.8tn capital expenditure, will become a mirage.”
[Punch]