Chuks Okocha
11 November 2008
Abuja — Governors of the 36 states of the Federation are against the conservative benchmark of $45 per barrel of crude oil for the 2009 budget.
The governors unanimously agreed that the Federal Government should jack up the benchmark to $50 because of the enormous expenditure ahead of the states in order to tackle the challenges of development in the country.
Crude oil price is currently $63 per barrel, having peaked at $147 early in the year and now dropping rapidly with the global financial crisis.
The Federal Government had earlier fixed $62.50 benchmark - a price it initially thought was conservative until the sudden turn of events in the international market.
A new benchmark of $45 per barrel was fixed in a swift response to the market situation. The difference between the benchmark price and the actual market price is usually saved in the Excess Crude Account which is then shared among the three tiers of government.
Nigeria finances between 60-70 per cent of its national budget from crude oil proceeds, making the country's fiscal system depend heavily on the unstable oil market.
The governors wanted more money to be available for their own individual budgets next year.
"The $45 benchmark is too low to make any meaningful impact on our planning," a governor told THISDAY last night. "We believe $50 is a more realistic price. We don't see the price falling below $60 next year, all things being equal."
The meeting of the Governors' Forum was held at the Kwara State Governor's Lodge, Abuja, and presided over by the Chairman of the forum, Governor Bukola Saraki of Kwara State, who addressed the press after the meeting.
"We've resolved to canvass this position at the National Economic Council (NEC) meeting tomorrow (today)," he said.
NEC is presided over by Vice-President Goodluck Jonathan.
Saraki also spoke on the decision of the governors to set up a committee on the proposed constitutional ammendment and the Fiscal Responsibility Bill which he said had been passed by all the states.
He also said 30 out 36 states have appropriated excess crude funds for the national power project.
THISDAY was also informed that last night's meeting was tense as Niger Delta governors engaged their counterparts from other parts of the country over accusations of mismanagement of derivation funds.
Governor Gabriel Suswam of Benue State reportedly accused the Niger Delta governors of not giving proper account of how they spend the windfall accruing to their states, a statement said to have been frowned on by Governor Rotimi Amaechi of Rivers State who demanded a retractioin.
"Suswam said he was not going to withdraw the statement," the source told THISDAY. "Amaechi said he knew for sure that only three people from the Niger Delta were lifting oil while the rest are from other parts of Nigeria. The Governor of Katsina, Ibrahim Shema, asked him to stop speaking in coded language and name names because he could provide the statistics to show that Amaechi was not correct."
At this state, the meeting was said to have decided that the governors should "calm down".
A committee was also set up to harmonise the decisions of the meeting which would be canvassed at NEC meeting today.
THISDAY had reported yesterday that following the declining prices of crude oil in the international market, the governors would hold a crucial meeting to discuss its implications on the country's revenue profile.
The governors were also expected to take a final decision on the award of contracts for the building of the N4.9 billion National Secretariat of the Governors' Forum.
THISDAY gathered that the meeting is expected to hold at the Kwara State Governor's Lodge, Asokoro, Abuja,
The declining crude oil prices may affect individual state budgets next year since they are benchmarked against the prices.
The Federal Government expects to spend N2.67 trillion in next year, and hopes to realise a total of N4.558 trillion as revenue.
In a document on the proposed 2009 budget titled "Federal Government of Nigeria 2009 Budget Preparation and Submission Call Circular", reported by THISDAY last week, the proposed N2.67 trillion expenditure is made up of statutory transfers of N164.3billion, debt service of N436.2 billion and spending of N2.076 trillion for Ministries, Departments and Agencies (MDAs) including Multi Year Tariff Order (MYTO) of N60 billion
The aggregate expenditure profile represented a decrease of 2.6 per cent and a decline of 6.2 per cent in MDA allocation when compared to the N2.745 trillion and N2.2 trillion of 2008 budget respectively.
For the draft budget, government attributed the decline to reduction in the total expected revenue to be raked in from an estimated lower production level of 2.3 million barrel per day (mbpd) as against 2.45mbp used for 2008 budget.
He also explained that the decline was as a result of the sliding oil prices at the international market, which had fallen from a peak of about $147 per barrel to a current level of $63 per barrel.
According to him, "The total available resource base is smaller as a result of the fact that oil production used for 2009 budget is at a more realistic level of 2.3 Mb/d vs. 2.45 Mb/d used in the 2008 budget, but actual output in the first half of 2008 was just 2.02 Mb/d, following continued disruption to production.
"The oil price has been declining in recent months - from a peak of about $150 per barrel in June to $112 per barrel in August."
Further breakdown, revealed that, statutory transfers has been put at N164.3 billion, made up of N89.7 billion to the National Judicial Council,N34.9 billion to Niger Delta Development Commission and N39.7 billion to the Universal Basic Education Commission.
The debt service payment of N436.2 billion will be used as N387.8 billion for domestic debt and N48.4billion for of foreign debt.
The MDAs are expected to spend N2.076 trillion, from which the sum of N110 billion, being savings from Paris Club debt relief will be spent exclusively on specific projects and programmes to support the attainment of MDGs.
Also as part of the MDA spending, the sum of N60 bilion is set side for MYTO in the power sector as, according to the document, government moves to tackle the challenges in the sector even as the sum of N200 billion will be set aside to finance the pension and the ongoing public service reforms initiative.
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