The Federal Government has once again revised its 2015 budget oil benchmark price to $65 a barrel, compelled by more-than-expected deceleration in global oil prices.
The government had about a fortnight ago withdrawn the 2015-2017 Medium Term Expenditure Framework (MTEF) and revised the oil benchmarkfrom $78 to $73.
But current reality in the global oil prices has compelled another decrease in the benchmark to $65 a barrel, effectively slashing next year’s budget by another 12 per cent, in the face of dwindling oil prices.
Oil prices have fallen more than 30 per cent since June, although Light Brent crude rose 44 cents to $70.98 a barrel in yesterday’s trading, while the US’ West Texas Intermediate (WTI) rose by 67 cents to $67.55 a barrel.
Oil prices had tumbled by about $2 on Tuesday after Iraq announced plans to boost the country’s crude oil exports after striking a deal with the autonomous Kurdish region.
The Coordinating Minister for the Economy and Minister of Finance, Dr. Ngozi Okonjo-Iweala, the development to THISDAY Tuesday night.
She was quoted as saying that d the new benchmark price of $65 per barrel had been approved by President Goodluck Jonathan and a revised expenditure framework for the next three years was resubmitted on Wednesday to the parliament for its approval.
She said, “If you recall, I had said as recently as three, four days ago that we have a central scenario of a reduced budget benchmark of $73 because we talked to a lot of analysts. We got ranges of $60 to $85. And so, we took a mid-point and that was how we arrived at $73.
“But we have always been clear that the price could certainly fall lower, and that’s why we took this scenario-based approach. I have said openly that we have done scenarios around $70, we’ve done $65, we’ve done $60, and we will kick those scenarios in as the situation evolves.
“So, yes, we have looked at it and we decided that we are going to propose a lower benchmark than what we have. Mr. President has approved a price of $65 a barrel and we are sending a new MTEF to the National Assembly tomorrow (Wednesday).
She explained the revision was nothing new, as her ministry and the budget office had considered a number of scenarios, adding: “As soon as we look at the situation, we kick the appropriate scenario in. We have been prepared, that’s why the turnaround has not been that long.”
On whether the revised MTEF will not delay the passage of next year’s budget with the elections around the corner, the minister said the National Assembly deserved commendation because of their collaborative disposition, adding that everyone was aware of the situation in the country and expressed optimism that the legislature would be cooperative.
“You recall that the other time when we had to revise, they were quite understanding and asked us to submit it. Similarly, what we are doing is that we’ve not been waiting to execute.
“To take the kind of approach we took, it means we were already preparing the budget… So we are hoping to send the budget to the National Assembly pretty soon,” she said.
