Lagos — Should the price of crude oil, which currently stands at $52.45 per barrel, continue to fall, the Federal Government will augment the 2009 budget with funds from the Excess Crude Account which stood at $20.145 billion as at last Friday.

It also emerged yesterday that the presentation of the 2009 budget to the joint session of the National Assembly, scheduled for today, has been postponed.

The Excess Crude Account, which is a component of the country's foreign reserves, was created by the last administration to save oil windfall - although many politicians have declared the account illegal, demanding that the money should be shared by the three tiers of government.

A top Presidency official confirmed the new development to THISDAY, insisting that government would not readjust its crude oil price benchmark of $45 any longer, having already cut it from the initial $62.50 proposal.

Experts have, however, warned that Nigeria was facing a "very difficult situation" in terms of funding its 2009 budget.

"We won't adjust our benchmark because it doesn't make sense to do so. As long as it is not too low, we will augment with our savings from the Excess Crude Account. No one knows the extent of the recession. It is getting worse by the day.

"As long as the US is in recession, the price of crude oil at the international market will continue to drop," the official said.

Concerns over the global recession, which led to fall in crude oil prices, had forced the Federal Government to adjust the crude oil price benchmark for the 2009 budget, which, experts say, would translate into a cut of more than 30 per cent in budgeted oil revenue.

This new benchmark is 28 per cent below the initially proposed $62.90 and some 24.6 per cent below the $59 benchmark for 2008 budget.

Under the proposed budget estimated at N2.67 trillion, which is N2 billion below the 2008 budget, recurrent expenditure is N1.523 trillion, capital expenditure stands at N552.2 billion, while debt service is put at N436.2 billion compared with N66 billion in 2008 budget.

Nigeria had entered 2008 with a very strong position: Current account surplus of $21.2billion in 2008, external reserves of $63billion, stable currency and an average growth of 6.2 per cent in five years.

The nation's external reserves are made up of the following components - Excess Crude Proceeds Account ($20.145 billion), Central Bank of Nigeria (CBN) Account ($34.110 billion) and Federal Government Account (N3.417 billion), stood at $57.673 billion as at last Friday.

With the country's monthly import bill averaging about $2 billion (foreign exchange outflow), Nigeria can finance 48 months imports with her $57.673 billion external reserves.

This puts Nigeria in good stead given the fact that the accepted norm is that a country's external reserves must be able to finance at least six months of her imports.

But the continuous fall in crude oil price at the international markets has cast shadow over the budget for 2009 owing to the country's over-dependence on the oil revenue, which accounts for about 95 per cent of Nigeria's exports revenue.

Analysts insist this development, which signals reduction in Nigeria's revenue and significant belt-tightening, have serious implications for the country's economy, which is now more vulnerable to oil markets and exogenous shocks.

For instance, the Managing Director Financial Derivatives Company Limited, Mr. Bismarck Rewane, said if the fall in the crude oil price is sustained, Nigeria and virtually every country face a very difficult situation.

"To be very honest with you, I think we have found ourselves in a very difficult situation. It is either we spend everything we earn as revenue next year or we run a deficit budget," he said.

Rewane believes that the Nigerian economy needs to be stimulated.

"We can run a deficit budget as a fiscal stimulus, which is an extremely difficult decision to make. The benchmark price is supposed to be the target price, which allows leg-room, while the excess crude is supposed to augment the shortfall. So we need to make a decision of how much lower we can go to give ourselves enough leg-room. But with the current situation, where is the leg-room?

"The question now is that at what price would that be? We (country) have to make a decision of how much lower we can go in terms of the crude oil price benchmark because there will be a time when there would no longer a benchmark. Right now, our biggest problem is that we need to stimulate our economy. So we need to spend but revenue has dropped drastically," the Financial Derivative boss said.

Nigeria, he said, squandered certain opportunities especially during the oil boom when the country was supposed to invest more in infrastructure.

Instead of rescheduling our debt, he said, Nigeria should have invested in infrastructure since it is now difficult to secure international funding given the global financial turmoil that has seen several developed nations injecting several trillions of dollars to save their financial system.

The Managing Director of Economic Associates, Dr. Ayo Teriba, however, said the Federal Government ought to have based its benchmark on scenarios (lower, medium and higher price), instead of using just one single price.

"The Federal Government should have operated on scenarios rather than one single price. What if the price of crude oil rebounds? Would government have to re-work its budget again? I think the crude oil price benchmark should have been based on low, medium and high price so that the Government could decide on which projects should be financed through each of these scenarios," he said.

But he was optimistic that the price of crude oil would rebound latest by February next year, explaining that the ongoing contraction in the price of oil was not a seasonal phenomenon.

He said the contraction was triggered by the panic among individuals, companies and governments following the global financial crises.

"There is usually a contraction in the price of crude oil in the international market by September just as it was last year, because of summer. But the current contraction is not seasonal. It was caused by panic among individuals, companies and governments. Latest by February, confidence is expected to return and the price of crude oil would rebound," he said.

Responding to the suggestions by the experts, a top Presidency official told THISDAY last night that the Finance Ministry had already built different scenarios around the benchmark up till 2010.

She said that even if the price of crude oil falls to $20 per barrel and production drops to 1.8 million barrels per day, all the tiers of government would not be affected in terms of their finances.

She explained that the Ministry consulted over 22 global investment outlets before arriving at the $45 benchmark, stressing that the only challenge the Federal Government has now is how to fund infrastructural projects such as the railway and new airports.

Meanwhile, THISDAY learnt that the postponement of the budget presentation was occasioned by the official visit of the Zambian President, Levy Patrick Mwanawasa, to Nigeria who would be received and hosted by President Umaru Musa Yar' Adua.

Chairman of the Senate Committee on Media and Information, Senator Ayogu Eze, said the joint session address would now hold Tuesday, next week.

A Presidency source also confirmed the development but attributed it to the need for the Executive and the Legislature to iron out grey areas before the presentation to avoid disagreements.

This is the second postponement the budget presentation would suffer in about a week.

The budget presentation had been slated for Wednesday, last week, but both the Presidency and the National Assembly reportedly agreed to shift it to enable exhaustive consultations among the National Assembly, Budget Office and the Ministry of Finance.

The Federal Legislature had complained that it was not consulted in the preparation and packaging of the proposed 2009 fiscal estimates.

Eze had said Tuesday that Yar'Adua would present the 2009 budget to the joint session of the National Assembly today.

The session, slated for 11.30 a.m. had been listed on the Senate Notice Paper of that day (Tuesday), indicating that a motion to that effect would be moved by the Senate Leader, Senator Teslim Folarin.

Eze had told Senate Correspondents that collaborative work between the National Assembly and the Executive on the project was in progress, adding: "If the consultations go well as we believe they are going now, nothing will stop us from giving that budget accelerated consideration and passage."

He had said Yar'Adua would most likely present the budget 2009 to the National Assembly today, even as he had stated that the budget would be passed before December 31, 2008 to allow implementation from January 2009.