The much awaited 2015 budget may take some time to materialise as the lower, upper chambers and executive arm are at daggers drawn over irreconcilable differences spurred by the plummeting oil prices, naira devaluation, among others, reports Ibrahim Apekhade Yusuf
BUDGET crisis imminent but this time at issue is that there are clear discrepancies and if you may, with the benchmark set by the executive tier of government.
It would be recalled that the House of Representatives rejected the $65 oil benchmark proposed in the 2015 budget by the executive.
It said the 2015 proposed budget was based on certain policy thrusts, instruments and assumptions that were flawed and needed to be “critically looked at.”
The lower house preferred a benchmark of between $53 to $56 benchmark.
The Green Chamber described the benchmark for 2015 budget as “unrealistic” and “a problem”. “The budget cannot fly,” it said.
It also faulted another parameter in the budget, which is the 2.278 million barrels per day crude oil production estimate in the Medium Term Expenditure Framework (MTEF), saying it does not also reflect realities; little wonder at earliest meeting held last week between the Executive and the House on the budget at the National Assembly was stalemated.
The 25-member special committee headed by John Enoh, chairman, House Committee on Appropriation and Finance Minister Dr. Ngozi Okonjo-Iweala and Director General, Budget Office, could not resolve the issue.
After hitting a high of $115 a barrel in June, the price of internationally traded Brent crude oil has dropped rapidly and almost hit $45 a barrel last month – a near six-year low.
Ali Al Naimi, Saudi Arabia’s veteran oil minister, said in December it was braced for further drops in the oil price and would not change its strategy even if prices hit $20 a barrel.
The slide in the oil price has plunged Nigeria’s economy into turmoil. The country, which is Africa’s largest producer, depends on oil typically for about 70 per cent of government revenue.
Bone of contention
Since submitting the 2015 Budget to the National Assembly in November 2014, Nigeria’s Budget Office, although required by law to publish the budget details have failed to do so, preferring to keep it in secret.
Details of the budget are not available to Nigerians, amid an unusually high expectation of the budget’s specifics as the government struggles to minimise the impact of slumping oil price. Many Nigerians are eager to see in clear details how the government has responded.
According to the estimates, the total spendings are N4 357 959 999 999
It should be recalled that President Goodluck Jonathan refused to present the 2015 budget proposal to the National Assembly instead assigned the presentation to the Minister of Finance, Dr. Ngozi Okonjo-Iweala.
The bone of contention, a source told The Nation, was the parameters. The two parties could not agree on the benchmark. While the Federal Government wanted a benchmark of $50 per barrel, the House insisted on between $53 and $56 per barrel.
According to the source, the over five hours closed door meeting also featured differences in exchange rates between the two parties.
A member of the committee rejected N165 to a dollar proposed by Dr. Okonjo- Iweala’s team and insisted on $180 to a dollar.
The Nation also learnt that capital expenditure dominated the discussion as the lawmakers insisted that the proposed 17 per cent of the budget allocated to capital project was meagre and that it should be upped to about 25 percent to give Nigerians some benefits.
In an earlier interview, shortly before plenary, the Chairman, National Assembly Budget and Research Office (NABRO), Hon. Michael Opeyemi Bamidele, decried the parameters in the 2015 budget, especially the oil benchmark and the oil production estimates
Of the oil benchmark, he said: “Definitely, this is a wrong assumption. It’s a problem. It’s part of why the budget cannot fly and it’s not flying.
“Going by what is happening in the international crude oil market, it’s wrong. It’s unrealistic for the Executive arm of government to have proposed a $65 per barrel benchmark.”
The lawmaker said his committee did some comparative analysis on the issue and that it is evident that the executive is not forward looking.
“Iraq pegged its benchmark at $60 per barrel; Saudi Arabia pegged its own at $60 and Venezuela $60. These are countries that don’t even have the kind of challenges that we have, and they are countries with better macro-economic fundamentals. But based on foresight, they chose $60 as their oil benchmark.”
Bamidele said the budgets of these three countries had been passed in 2014 before the price of oil fell.
“Here we are in Nigeria, we’re already in the middle of it and today, they (executive) are still talking about $65. Where is the foresight?”
Bamidele also criticised the 2.278 million barrel per day estimate of the executive, saying it’s not a true reflection of current realities.
House spokesman Zakari Mohammed expressed confidence that the 25-member committee headed by the chairman of the House Committee on Appropriation, John Enoh, which had been mandated to meet with the Minister of Finance on realistic parameters for the 2015 budget, will come out with a benchmark that reflects the true position of Nigeria’s oil earnings, as against the $65 proposed in the budget.
Why lawmakers close ranks
Drawing strength from its counterparts in the lower chambers, the upper house who met behind closed doors last Tuesday for about two hours, while analysing the budget proposals of the various Ministries, Departments and Agencies of the Federal Government for the 2015 fiscal year and their performances for last year, were categorical in their opposition to the 2015 budget considering the different incongruous items.
A senator, who spoke on the condition of anonymity, told our correspondent that his colleagues expressed anger at Minister of Finance and Coordinating Minister of the Economy, Dr. Ngozi Okonjo-Iweala,Okonjo-Iweala and accused her of deliberately drawing back the wheel of the nation’s progress.
The senator said, “All of us are not happy that most of the MDAs could not execute any reasonable capital project last year because the little money released to them by the finance minister was not enough to pay the contractors who had executed projects for them in the past.”
Other senators, who spoke to our correspondent after the meeting, said the lawmakers expressed concern over the meagre allocation of N387bn for capital projects in the 2015 budget proposal.
This, they said, was unprecedented even as the recurrent component was allocated over 90 per cent of the N4.3tn in budget estimates.
They, however, resolved to carry out the necessary legislative duties this year to ensure that the right actions would be taken against government officials who deliberately refused to release funds to execute projects approved for execution.
They also urged members of the various Senate committees working on the budget to expedite action so that it would be passed before the presidential election scheduled for March 28 since the Easter break would come immediately after the polls.
The lawmakers, it was gathered, vowed that they would not approve such a lopsided allocation.
Consequently, the various committees were directed to liaise with the MDAs to cut down on recurrent votes in order to make more funds available for projects.
The senators later vented their anger on the various committees when some ministers and heads of government agencies appeared before them to defend their 2015 budget proposals.
They vowed to redress the lopsided recurrent expenditure and capital votes in favour of the latter.
For instance, while speaking during the sitting of the Senate Committee on Power, Mines and Steel, Senator Victor Lar, said, “A situation where we considered a budget, have it approved, then somebody sits in an office and refuses to make releases is too bad.
“Ministers and heads of various agencies who had awarded contracts could not pay but somebody would sit in the comfort of her office and declare a surplus. Is that an economy that is growing?
“This is simply lack of planning; this is frustrating and it cannot go on like this. The presentation by the Minister of Steel, for instance, is an opportunity to raise the revenue profile of the ministry from a non-oil sector, which would have enhanced economic growth was frustrated.
“A serious nation would have encouraged this ministry to ensure that everything it required was provided but this is the same ministry that has been subjected to the same envelope system and to the same non-release of capital votes, among others.”
Also, Senator Chris Ngige, expressed fears that the economy might collapse if the current trend of non-release of funds for project execution continued unchallenged by the appropriate arms of government.
Newly approved budget benchmark
After several weeks of bated breath, the Senate last Tuesday approved a $52 per barrel oil benchmark for the 2015 budget. It also predicated the budget on an exchange rate of N190 to the dollar.
The resolution on the budget benchmark and exchange rate was the outcome of a one-hour closed-door session held by the senators before the commencement of plenary.
The $52 oil price benchmark was arrived at on Wednesday after the chairman, Senate Committee on Finance, Ahmad Makarfi, tendered the report of the revised 2015-2017 Medium Term Expenditure Framework (MTEF) and Fiscal Strategy Paper (FSP).
A source told that several senators who spoke at the closed-door session, expressed concern over the state of the economy, regretting that the nation would have to resort to borrowing to finance some projects.
According to him, it was resolved that most of the budgetary allocations to various sectors would have to be adjusted to reflect the true state of revenue expectations.
He also said that implementing capital projects this year would be a herculean task as a result of the drop in revenue occasioned by lower oil prices.
The source added that although the Senate was conscious that the naira was currently being exchanged at the rate of about N199 to $1 in the interbank market, the Senate deliberately opted to approve a lower figure for the exchange rate.
The federal government had on December 17 laid a budget of N4.357 trillion predicated on a $65 per barrel oil benchmark and an exchange rate of N165 to one dollar for the 2015 fiscal year.
The document also consisted of N2.622 trillion for recurrent expenditure, N627 billion for capital expenditure and N3.602 trillion as the government’s revenue target in 2015.
Despite dwindling oil revenue at the time, the federal government stuck to the $65 per barrel oil benchmark proposed for the 2015 budget as contained in the revised Medium Term Expenditure Framework (MTEF) which it re-submitted to the National Assembly on December 2.
Prior to reducing the oil benchmark to $65 a barrel, the federal government had reviewed the oil benchmark from $78 to $73 per barrel on November 18.
The Senate’s approval of the $52 oil benchmark, it was learnt, may not be unrelated to the agreement reached by the executive arm of government and the National Assembly to settle for the new benchmark following weeks of negotiations between them.
Both arms of government had been meeting to find an agreeable benchmark but disagreements over some budget details have lingered.
A source privy to the negotiations disclosed that while the executive had proposed $50 per barrel, the lawmakers rooted for $55 per barrel, after which both parties were said to have finally agreed on $52 per barrel.
Another major highlight of the negotiations was the executive volunteering a 25 per cent cut in the State House budget.
An initial agreement of N115 billion was also reached as the National Assembly budget, which is N35 billion or 23 per cent short of the lawmakers’ regular N150 billion annual budget.
