NIGERIA’s plummeting export of crude to the United States is bitter food for thought. According to newspaper reports, crude export to America nosedived from 810, 000 barrels a day in July 2011 to 361, 000 barrels as at July 2012 – a whopping 449, 000 barrels plummet! Even then, the 2011 figures were a decline from more than one million barrels a day in 2010.
That should alert our economic managers to think of further diversifying the crude export market, aside from moving away from decades of near mono export driven by crude oil – hardly a novel call, for that has been the campaign for decades now.
But not even that dying market should be turned into a potent scarecrow, in the executive-legislative war over the appropriate budget benchmark for receipts from exported crude. The executive has suggested US $75. While the Senate prefers US $78, the House of Representatives is insisting on US $80, as basis for computing the likely revenue inflow, on which Budget 2013 would be hinged.
Not unexpectedly, Dr. Ngozi Okonjo-Iweala, finance minister and coordinating minister for the economy and chief strategic mind behind the executive budget estimates, has climbed on the moral high horse, playing the role of a hurt visionary, on why the benchmark must stay at US $75.
“These are some of the reasons we went for a sensible US $75 benchmark price,” she told The Guardian, “in view of the changing nature of oil supplies in the world’s principal markets, and the possible impact on demand.”
As a general principle, the minister may well be earnest. If the market is shrinking, it logically follows supply might just outstrip demand, leading to a glut. If that happens, price will come tumbling. That would mean that the lower the benchmark, the more secure the integrity of the budget, since it is based on expected, and not ready cash.
Still, the minister’s attempt at stacking cards is apparent. Though crude export to the United States may have dropped and (no thanks to new technology which could turn the heaviest of crude into high-end refined fuel) Nigeria’s sweet Brent is progressively threatened globally, Nigerian National Petroleum Corporation (NNPC) sources maintain the drop in the American market has been taken up by other buyers, thus further diversifying the market; and making more improbable the event of a market crash.
If that is indeed so, then there is little basis for the minister’s subtle attempt to turn a just alert into a shrill alarm, just to push the executive’s case for US $75. For the 2013 budget to be well implemented, the unit of expected cash – the benchmark – must be right. But that would not be attained by each side getting fixated over its own proposals. They should rather dialogue for a reasoned middle path.
Both sides are hobbled, though. The executive is fairly and legitimately charged with fixing arbitrary benchmarks to create artificial budget deficits, which actual export receipts could fund. But instead of presenting supplementary budgets for fresh appropriations, it resorts to borrowing, for which the public is punished with avoidable interests.
Besides, the presidency is rather too cozy with the idea of free funds it can play around. This vexed issue has turned the states hopping mad at the Federal Government playing god over money that belongs to all. The legislature, on the other hand, is no less legitimately charged with being irredeemable spendthrift, particularly when the issue is securing own pork.
Both sides should turn the patriotic leaf to lay a strong foundation for Budget 2013. But much more, the authorities should do more in the diversification of the economy beyond crude oil by taking special advantage of agriculture.
