Ayodele Aminu and Constance Ikokwu in Washington, D.C. and Kunle Aderinokun
14 October 2008
Abuja — Indications have emerged as to why the presentation of the proposed 2009 budget to the National Assembly by the Federal Government was being delayed.
A Ministry of Finance source revealed to THISDAY in Abuja yesterday that the Federal Government is currently adjusting the 2009 appropriation bill, especially as the proposed crude oil price benchmark of $62.5 per barrel would have to be changed to align with the current realities in the international oil market.
The uncertainties in the oil market have double consequences for Nigeria, Central Bank of Nigeria (CBN) Governor, Professor Chukwuma Soludo, told journalists in Washington DC, United States, yesterday, warning that falling prices and the search for alternative sources of energy are threats to Nigeria.
Crude oil prices in the international market had risen to all-time high of $147 per barrel in the second quarter of this year and has plunged to $85 per barrel as at last week and even plummeted to a 13-month low of $77.70 per barrel last Friday on the New York Mercantile Exchange after losing $8.89 a barrel Friday, the second biggest decline ever.
The Federal Government had late last month pegged the benchmark for the 2009 budget at a "comfortable" $62.5 per barrel, but has now realised that based on trend in the international market, the benchmark may be a bit risky.
Although a new figure has not been fixed for the benchmark, THISDAY gathered that it is expected to be lower than $59 per barrel on which the 2008 budget was predicated.
The difference between the benchmark and the actual price is saved in the controversial Excess Crude Account, which is regularly shared by the three tiers of government. The special account forms part of Nigeria's foreign reserves.
THISDAY learnt that President Umaru Musa Yar'Adua had directed the Secretary to the Government of the Federation (SGF), Alhaji Yayale Ahmed, to set up an Inter-ministerial Committee headed by the Minister of State for Finance, Mr. Remi Babalola, to adjust the 2009 Budget.
The budget, which work is at an advanced stage, is expected to be presented to the Federal Executive Council (FEC) this October for approval and onward presentation to the National Assembly by President Yar'Adua.
Already, the Federal Ministries, Departments and Agencies have defended their budget envelopes.
THISDAY also learnt yesterday that Yar'Adua has directed that for the 2009 Budget, allocations for the purchase of cars and overseas training should not be included.
Yar'Adua's directive is said to be aimed at blocking leakages and frivolous expenditure by MDAs.
This, the source revealed, was a move by the administration to drastically cut down on recurrent, overheads and capital expenditures in a bid to manage resources prudently as well as ensure quality expenditure.
The 2009 Budget is expected to focus on the priority areas of the seven-point agenda of the administration.
The Federal Government has said the next budget will be a clear departure from the past, as some MDAs will not receive any capital allocation.
Starting with the 2009 Budget, there will be a performance appraisal of the budget with the ministers and permanent secretaries of federal ministries held responsible for poor performance of the budget.
Meanwhile, Soludo has warned that the tumbling price of oil and the global search for alternative sources of energy represent a "double threat" to Nigeria, which relies heavily on the commodity for its national revenue and budget.
Soludo made the statement during a press briefing with Nigerian journalists attending the World Bank and International Monetary Fund (IMF) annual meetings.
The CBN governor who led the Nigerian delegation to the event cautioned that the country must acknowledge this reality and respond to it adequately in the interest of its people.
"We have to plan a response because surely the world is now committed to finding an alternative to oil we have and it's a double threat. On the one hand, we have the price of oil tumbling and on the other hand, the world is going to be working hard to find an alternative," he stated.
Soludo explained further: "And you are likely going to find an inverse relationship between the price of oil and the development of alternatives and already the price of oil has begun to head south. And if progress continues to be made in that regard, it might even portend grave danger for our oil prices."
The search for alternative sources of energy has dominated the US elections. Nigeria supplies about 15 per cent of US oil needs and Democratic candidate, Senator Barack Obama, has promised to invest $10 billion annually on alternative sources of energy to reduce dependence on crude oil.
Republican John McCain has pushed for more domestic drilling in order to reduce the country's reliance on foreign oil and bring down the price.
In another development, Soludo disclosed that Nigeria lost a little bit of the country's share, after the IMF voice and quota reform.
He noted that the developing world was keen to increase its voice in both the IMF and World Bank because it accounts for about 50 per cent of world GDP in output of goods and services.
"The final point for Nigeria and Africa is the issue of voice and quota. IMF has finished its own reforms. I think we lost a little bit in terms of our share in the entire quota. Now, the Bank is embarking on its own," he said.
"A major issue in the debate is in respect of how to increase the voice of developing countries. Evidently today, if you sum up the entire developing world, they account for about 50 per cent of the world GDP in output of goods and services. And therefore people are demanding that they should have equal voice," he added.
He said the new Policy Support Instrument (PSI) of the IMF was still being discussed.
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Will these mugus be able to reduce their budgetary marker estimates fast enough to keep up with the fast declining crude oil price – the only person I feel sorry for in all this is Soludo for being in such bad company of mugus. Why don’t they wait another 6 months for the declining oil price to reach bottom so the mugus could reduce their estimates to match the actual price once and for all. Leading to 2007, we asked the politicians to be more patient while OBJ continued with the reform policies he started in 1999 so he can hand over to the politicians a more robust economy and more stable polity. But noooo they all shouted in unity claiming that they’ve learned to work amicably amongst themselves for the betterment of the common masses. With their foreign aiders and abettors who never cared for our ordinary folks but for a regular flow of oil as long as we have mugus in power that they can easily manipulate. Consequently, power went back to the same mugus that drove the country into the ditch. Now you all see what you clamored for – same old inept civilian govt that don’t know a goddamn s--t about economics nor civic minded enough to know when to run from when to punt. As an alternative, we asked for 50/50 share of oil proceeds between each state of the federation so each state can allocate enough fund for R&D to find and develop altaernative wealth to wean us from our over-dependency on Crude Oil alone, but, nooo, so the North could continue to hold the rest of us down while the Norths keeps groping to find its feet and the wherewithal to catch up with the South, despite the fact that 8 of the 10 heads of state Nigeria ever had were all Northerners. Well, here we are & well deserved too, Nija. Your cowardness & ignorance is palpable & doesn’t even deserve God’s intervention despite all the evidence written on the wall for you to take advantage of. Nigerians are like a student who is about to take the JAMB test, if all the answers are given to this blockhead well in advance of the test time, this doofus will still score zero% & fail, big time. I am tapped out. Good luck and good riddance to all I ever cared about.