Oil below $60 as FG presents 2015 budget to N’Assembly

 

International Brent crude oil price dropped to $59.83 per barrel on Tuesday as the Federal Government notified the National Assembly of its intention to present the 2015 budget to it on Wednesday (today) for consideration and approval.

The drop raised fears that the $65 oil benchmark   for the 2015 financial estimates   might be further reviewed downwards.

The Minister of Finance and Coordinating Minister for the Economy, Dr. Ngozi Okonjo-Iweala, is to present the N4.357.96tn budget to the two arms of the National Assembly.

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The details of the financial proposal are contained in the Medium Term Expenditure Framework and Fiscal Strategy document   sent to the Senate by President Goodluck Jonathan.

The government   proposed N627bn out of the total figure as capital expenditure and N2.622tn for recurrent expenditure.

The revised 2015-2017 MTEF showed a sharp reduction in the figure presented in the MTEF earlier sent to the Senate but was withdrawn following the earlier crash of   crude oil price in the international market.

In the first MTEF presented   in September, 2014, the government   had proposed a benchmark of $78 per barrel of crude oil, with an exchange rate of N160 to a dollar.

The total budget figure then was N4.8tn, but when   oil price crashed, the government effected a reduction in the budget benchmark from the earlier proposed $78 to $73 per barrel, with an exchange rate of N162 to a dollar.

The total budget figure in that proposal was N4.7tn but with further fall in the oil prices, the benchmark was also   reduced to $65 per barrel, with an exchange rate of N165 to a dollar for the 2015 fiscal year.

In the House of Representatives, Jonathan’s decision to delegate the minister instead of coming to do the presentation himself led to   protests that could have stalled the budget.

Shortly after the Speaker, Mr. Aminu Tambuwal, had read the President’s letter   requesting the approval of the House for Okonjo-Iweala to present the estimates today, some members raised voices against it.

The House Minority Leader, Mr. Femi Gbajabiamila, who led the protests said the practice over time was for the President himself to present the estimates to a joint session of the National Assembly.

He observed that since 2013, Jonathan had formed the habit of delegating the minister to do the presentation on his behalf.

The lawmaker argued that while his excuse of being out of the country last year during the budget presentation could be overlooked, his decision to delegate it again this year was questionable.

Gbajabiamila asked , “Why is the minister coming again when the President is very much in the country? The way we are going, we don’t want a situation whereby the parliament will be disregarded to a point where a Personal Assistant to Mr. President will present the budget estimates to us one day.”

The All Progressives Congress legislator   had hardly rounded off his points when the House Deputy Majority Leader, Mr. Leo Ogor, opposed him.

Ogor, a Peoples Democratic Party member, used the cover of the 1999 Constitution to counter the submission of the minority leader.

He noted that while Section I of the 1999 Constitution recognised its “supremacy”, Section 81 specifically mandated the President to “cause” the budget estimates to be prepared and laid before the National Assembly.

Ogor said, “It does not say the President ‘shall’ be the one to present the budget estimates. So, it is inconsequential for the minority leader to come under privilege to argue that the minister cannot do the presentation.”

His position was greeted with applause from the floor, an indication that he gave the correct position of the law.

Tambuwal intervened to further give Jonathan backing by making it clear that the President was not under compulsion to make the presentation personally.

According to the speaker, the President can choose not to observe the “parliamentary tradition” of presenting the estimates in person, adding that his choice of presentation should not stall the estimates.

He said, “The provision (of the constitution) does not say it is the President. Of course, parliamentary tradition expects him to present the estimates, but if he decides to go the other way, we must not be seen to be forcing the President to do so.”

Another APC lawmaker from Kano State, Mr. Ali Madaki, also came up with another point of privilege to argue that the 2015-2017 MTEF must first be approved before receiving the budget estimates from Jonathan.

Madaki’s protest, like Gbajabiamila’s, failed as Tambuwal overruled him.

The speaker explained that while it was the proper procedure to pass the MTEF before taking the budget, in the prevailing circumstances, time was not enough to follow that protocol.

He directed that the minister should go ahead to present the estimates , though the House would, in compliance with the law, first approve the MTEF before considering the budget itself.

Findings showed that Okonjo-Iweala, who rushed to the National Assembly early on Tuesday before the start of sitting, had met with the leadership of the House for over one hour.

The meeting was said to have discussed the “peculiar nature” of the 2015 budget, particularly the challenges posed by tumbling prices of crude oil on the international market.

A member of the House, who attended the meeting, said, “There are revenue challenges and there is the problem of time.

“The budget is already behind schedule; there is crude oil price instability.

“The minister wanted the leadership to appreciate all of this before bringing the budget estimates and to solicit the understanding of the House.”

Jonathan’s letter to the Senate did not attract any opposition from members when it was read by their President, David Mark.

The letter read, “I refer to my earlier transmission to the National Assembly in November 2014 of the revised 2015-2017 Medium Term Expenditure Framework, MTEF, for consideration and approval.

“Given further developments in the international oil market which have necessitated further revisions, amendments have been made to some parameters as well as to some fiscal estimates in the MTEF.

“I hereby forward copies of the revised 2015-2017 MTEF for the kind consideration of the distinguished members of the Senate and hope that it will be considered and approved expeditiously in order to bring 2015 Federal Government of Nigeria budget preparation process to quick closure.”

He   asked the Senate President to accommodate Okonjo – Iweala around 11am on Wednesday (today) to enable her to lay the estimates before his colleagues for   consideration and approval.

Jonathan explained that the unstable oil prices   were responsible for the seeming inconsistency of his administration in the handling of the MTEF and the 2015 budget proposals.

He said that   necessary adjustments would be done in future if the price of crude continued to drop.

He added, “In consonance with the provision of Section 81 Sub-section 1 of the Constitution of the Federal Republic of Nigeria 1999 as amended, I write to request that the distinguished Senate grant the Minister of Finance the slot of 11am on Wednesday,   December 17, 2014 to enable her to lay before you, the 2015 budget estimates.

“I am cognizant of the fact that the budget estimates are being presented before the passage of 2015-2017 Medium Term Expenditure Framework, MTEF. This is due to the extraordinary global circumstances that confronted us in the latter quarter of the 2014 fiscal year.

“As you know, the first MTEF with the budget benchmark of $78 per barrel was submitted to the National Assembly on 30th September 2014, and discussion on the MTEF and budget construction based on those estimates began with the relevant committees of the National Assembly.

“However, shortly after that submission, oil prices began to fall precipitously, leading to the revision of the oil benchmark price in the MTEF to $73 per barrel, which was resubmitted to the National Assembly on     November 18, 2014.

“Following this, the decision of OPEC at their meeting in Vienna on   November 27, 2014, not to cut production to support price led to a precipitous fall in the oil price to below $70 per barrel.

“This led one more time to another downward revision of the benchmark price to $65 per barrel and the revised MTEF, which we again submitted to you on   December 2, 2014.

“The uncertainty surrounding the global price of crude oil and its continous fall has occasioned delays in both the submission of the final MTEF and budget estimates. And we thus request your kind consideration of both these items together in view of our national budget calendar.

“We would like to confirm that having submitted these budget estimates, we are not proposing further revision of the oil benchmark price.

“Though prices continue to be extremely volatile at present and to trend further downwards, there are indications based on the price intelligence we have at this time, that prices may range between $65 and $70 per barrel in 2015.

“Nevertheless, we will like to emphasise that there is no ironclad guarantee where oil prices are concerned due to numerous underlining global geopolitical factors that are outside our control and unpredictable. Should prices fall below the range, the country will have to make further adjustments.

“We hope that despite these circumstances, the distinguished National Assembly members will give kind and due considerations to the budget estimates in sufficient time for us to implement the 2015 budget starting early next year.’’

The budget had been a source of debate between the National Assembly and the Executive owing to the oil price benchmark to be adopted.

Investigations revealed that the Federal Government was planning to raise a huge chunk of the nation’s revenue from non-oil sources.

For instance, the MTEF which laid down the assumption upon which the budget is prepared had projected an increase of N243.62bn for non-oil revenue from N3.28tn in the 2014 budget to N3.53tn in 2015.

The sources of government’s non-oil revenue are corporate tax (Company Income Tax, stamp duties, withholding tax, and capital gain tax; Value Added Tax, customs duty, excise duty and fees.

Others are special levies, independent revenues (Ministries, Departments and Agencies of government, operating surplus, dividends and consolidated revenue).

The   government is targeting an increase of N370.95bn in corporate taxes from N986.25bn to N1.357tn.

In the same vein, VAT was raised by N30.48bn from N845.45bn in 2014 to N875.93bn; while Customs Duty, Excise duty and fees on the other had witnessed a decline of N81.85bn from N782.38bn to N700.53bn.

The drop in customs duty, according to analysts, may be as a result of the   government’s backward integration policy which led to the ban on the importation of some items.

Also, the targeted revenue from special levies is expected to drop by N73.93bn from N222.47bn to N148.54bn while independent revenue is also expected to decline marginally from N452.04bn to N450bn.

Okonjo-Iweala had during the announcement of the austerity measures for the economy following the drop in oil prices, explained that efforts had been put in place to strengthen tax administration to get more revenue from the well-off in the society.

She lamented that only 25 per cent of Small and Medium Scale Enterprises are registered taxpayers, noting that remedying that will broaden the tax base.

Also, she said independent auditors only completed three to five audits a year compared to 50 a year in Angola.

Speeding up audits, she added, would help to improve tax collections and anomalies.

On the expenditure side, the minister said that more cuts on spendings would be implemented within the 2015 fiscal period.

However, she assured that more money would be channeled for growth-enhancing projects that would help cushion the impact of the austerity measures on ordinary Nigerians.

Okonjo-Iweala said. “For the immediate 2015 budget, we shall cut certain recurrent spending such as purchase of administrative equipment, overseas travels and trainings, etc.This is the low hanging fruit.

“We shall also complete the work on Integrated Personnel and Payroll Information System which has already covered half the agencies and weeded out 60,000 ghost workers saving N160bn.

“Completing this work could save another N160bn. In the medium term, the current pressures provide a unique opportunity for the country to reduce duplication of agencies,commissions and committees within the administration and to restructure and reduce recurrent expenditure, reform public administration and make serious efficiency gains.

“Inevitably, there will also be some cuts in capital expenditure in the 2015 Budget, but this is being done in a way that is pro-poor and pro-average Nigerian. Focus will be on priority sectors of infrastructure, health, education, and security, as well as growth stimulating and job creating sectors like agriculture, housing and creative industries.”

--Punch News