Daily Independent (Lagos)
Rotimi Durojaiye
14 October 2008
Lagos — Federal Government is re-adjusting and restructuring the 2009 Budget, including the oil benchmark.
This is sequel to the outlandish crash in prices of crude oil at the international market.
The crude oil has lost about $60 per barrel in the last five months.
Global crude oil prices, which rose to over $144 per barrel in May, have dropped to below $85 per barrel last week.
A Presidential source told Daily Independent on Monday that the earlier proposed $62.5 per barrel for the 2009 Budget was no longer realistic due to massive drop in crude oil prices and fears of further decline in the coming months.
Daily Independent gathered that the oil benchmark being proposed for the 2009 Budget would be lower than the $59 per barrel benchmark for the 2008 budget.
The proposed budget is to be based on a daily crude production of 2.3 million barrels per day (bpd), compared with 2.45 million bpd at a benchmark price of $59 per barrel.
A quarterly performance measurement and benchmark has also been introduced into next year's budget, which would see ministers and permanent secretaries held responsible for poor performance of the budget.
"An Inter-ministerial Committee has begun re-working the 2009 Budget arising from the threat posed by the global decline in crude oil prices. Although the Committee has not arrived at a final oil benchmark, technical analysis undertaken points to oil benchmark lower than the 2008 Budget. The government is cutting down on recurrent, overheads and capital expenditures in next year's budget in a bid to prudently manage resources as well as ensure quality expenditure," the source said.
President Umaru Yar'Adua had two weeks ago directed Secretary to the Government of the Federation, Yayale Ahmed, to inaugurate the Inter-ministerial Committee, comprising some key government officials and chaired by the Minister of State for Finance, Remi Babalola, to review and revise next year's budget.
The inauguration of the Inter-ministerial Committee was sequel to complaints and protests by some Ministers to the President over allocations to their ministries in the 2009 Budget.
The source revealed that the President had directed that no allocation be made for purchase of cars in the 2009 Budget as well as overseas training.
The President's directive, according to the source, is aimed at blocking leakages and frivolous expenditure by ministries, departments and agencies (MDAs).
The source also said some ministries would have no allocation for capital expenditure in 2009.
"The 2009 Budget is a clear departure from the past, as some MDAs will not receive any capital allocation. It will focus mainly on the Seven-point Agenda of the administration such as Power, Health, Education, Agriculture and the Niger Delta, and also include provisions for River Niger dredging and the second Niger Bridge," the source said, adding that the government will quarterly gauge the performance of the 2009 Budget in order to ensure it achieves its developmental objectives and goals.
The source also confirmed that the 2009 Budget was at an advanced stage of completion and would be presented very soon to the Federal Executive Council (FEC) and the National Assembly for consideration.
Meanwhile, most federal ministries at the weekend and also on Monday defended their budget envelopes before the Inter-ministerial Committee at the Federal Secretariat, Abuja.
Minister of State for Petroleum, Odein Ajumogobia, had last week in Lagos raised alarm over the threat posed to the 2009 Budget by the decline in crude oil prices.
He said except there was improvement in the global oil prices, the decline may impact on the implementation of the budget.
"There may be a need to intervene to balance the market, if the price slide seemingly predicated on demand and over-supply continues," Ajumogobia said.
Nigeria is the latest country in the exporters' group to float the prospect of supply curbs after other OPEC members - Libya, Iran and Iraq had expressed concern last week about the impact of the financial crisis on the oil market.
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