Budget 2013: NASS agrees on $79 Oil Price Benchmark, slash external borrowing to $7.2bn

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December 19, 2012/ BY JOHN AMEH / Punch

The Senate and the House of Representatives on Tuesday settled for $79 as the crude oil benchmark for the 2013 budget.

The recommendation for the approval was contained in the report of the Conference Committee of the two chambers on the 2013-2015 Medium Term Expenditure Framework and Fiscal Strategy Paper of the Federal Government.

The $79 is $1 less than the $80 the House of Representatives passed in October, and $1 above the $78 that the Senate passed earlier.

However, it is $4 higher than the original proposal of $75 by the Executive.

It will be recalled that the oil benchmark for the proposed budget of N4.9tn had generated much heat between the Executive and the National Assembly, particularly the House of Representatives.
While the Executive claimed it was playing safe because of unstable crude oil prices on the international market, the House argued that a higher benchmark should be used to cut budget deficit.

The 2013 budget has a deficit of over N1tn.
The House stated that rather than borrow over N600bn from the domestic market to fund the deficit as proposed in the budget, the government should raise the benchmark from $75 and use the difference to finance the deficit.

The benchmark was the only major area of difference in both chambers’ versions of the MTEF, as they largely agreed with the Executive’s proposals on other areas.

The House retained the crude oil production levels of 2.526 million barrels per day for 2013; 2.611 million bpd for 2014 and 2.68 million bpd for 2015.

The Senate cautioned the government against “extreme” foreign borrowing and called for the details of the Subsidy Re-Investment Programme to be attached to the annual appropriation for scrutiny and approval by the National Assembly.

Furthermore, the House directed the Nigerian Customs Service to improve on its revenue target for 2013 and advised the government to “take urgent steps to review all laws that allow its agencies to expend their revenue with little or no operating surpluses.”

Borrowings
In another decision on Tuesday, the House slashed the Federal Government’s borrowing plan for 2012-2014 from $9.2bn to $7.3bn.

At a session presided over by the Deputy Speaker, Mr. Emeka Ihedioha, members adopted the recommendations of the Committee on Aid/Loan/Debt Management, which worked on the borrowing plan.

The government had initially proposed to borrow $7.9bn, but last month, President Goodluck Jonathan amended it to $9.2bn.

However, the committee, which is headed by Mr. Adeyinka Ajayi, recommended $7.3bn.

Ajayi told the House that in considering the plan, the committee was guided by the Fiscal Responsibility Act, 2007, which provided that borrowing should strictly be for capital projects.

One of the loans that generated controversy was the $600m facility sought from the World Bank by the Lagos State Government.

The state had already taken the first tranche of $200m in 2012.

In the report passed on Tuesday, the House adopted the recommendation of its committee to include the second tranche of $200m in the borrowing plan.

 

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