Presidency proposes $42.5 oil price benchmark for 2017

• Projects N7.418tr federal revenue
• Naira falls to N313/$ at inter-bank market

For the next fiscal year, the executive arm of government has proposed a crude oil benchmark price of $42.5 per barrel, up from the $30 in the 2016’s budget.

An estimated N7.775 trillion is expected as revenue to be generated from the oil mineral resources alone based on the proposed $42.5 benchmark price and an estimated 2.2 million barrel per day oil production volume.

These proposals are contained in the 2017 – 2019 Medium Expenditure Framework and Fiscal Strategy (MTEF) prepared by the Ministry of Budget and National Planning that would guide the engagement with the National Assembly and other stakeholders, as well as the eventual implementation of the 2017 plan when finally passed and signed into law.

The proposal is to be submitted to the National Assembly before the end of August, according to the executive arm of government.

Yesterday in Abuja, the Budget and National Planning Minister, Senator Udoma Udo Udoma and the Minister of State in the Ministry, Mrs. Zainab Ahmed as well as the Director-General of the Budget Office of the Federation, Mr. Ben Akabueze, met with civil society groups to get their inputs to the MTEF in line with the provisions of the 2007 Fiscal Responsibility Act.

Unfolding the three-year MTEF budgetary plan, the executive also presented a crude oil production forecast of 2.3 million for 2018 and 2.4 million for 2019, just as it believes that the benchmark price for 2018 and 2019 would be $45 and $50 respectively. The proposal left the exchange rate at N290/$ for the three years beginning from next year to 2019 while it projected the inflation rate to remain at a double digit at 12.92 per cent for 2017; 11.88 per cent for 2018, and 12.57 per cent for 2019.

Surprisingly, Udoma projects Nigeria’s BDP to rise from its sluggish growth level of 0.35 now to 3.02 per cent in 2017; 4.26 per cent in 2018, and 4.04 per cent in 2019.

He explained: “The GDP growth is projected to gradually recover after the slowdown. A very marginal positive growth of 0.35 per cent is envisaged for 2016 and is projected to 4.04 per cent in 2019, thus averaging 3.77 per cent during MTEF period. GDP growth is largely to be driven by non-oil sector with agriculture, including agro – business, solid minerals, building and housing playing a lead role. Export- led growth is to be pursued as government will continue to step up efforts in diversifying the productive base of the economy as well as implementing relevant reforms.”

On non-oil mineral revenue, the minister declared that Companies Income Tax (CIT) was projected to increase from N1.788 trillion this year to over N1.86 trillion in 2017 and beyond; VAT collections/ receipts to increase by about 42.4 per cent in 2017, while operating surpluses from independent revenue sources projection are expected to moderate in 2017 and thereafter a modest growth.

On duties generated by the Nigerian Customs Service, Udoma said they were equally projected to moderate downwards in 2017 before picking up , while recoveries of misappropriated funds are projected to increase later this year and the succeeding years as well as recoveries / refunds from strategic alliance contracts and recoveries of other misappropriated funds and fines.

Reflecting on the implementation of the 2016 fiscal plan which came into full force early May this year, the minister announced that N2.123 trillion out of the approved N6.06 trillion, representing 35 per cent of the total sum has so far been released to Ministries, Departments and Agencies (MDAs) of government for implementation of the 2016 plan.

He gave the breakdown of the releases as follows: “Recurrent expenditure has been largely covered as at June. Debt service – N598.63 billion; Statutory transfers, N175.68 billion; Overheads and SWV, N125.4 billion; Personnel, N891.31 billion; and Pension and gratuity N79.18 billion.

“Capital expenditure was as at July 18 N253 billion. This has largely been releases for MDAs utilisation on investment in critical infrastructure projects. Total aggregate of capital expenditure, inclusive of capital share in statutory transfer is N331.58 billion as at July 18.2016.”

Udoma expressed regret that revenue projection or forecast as overall revenue flow was short by 55.2 per cent, representing N1.064 billion as at June 2016. He added however that the shortfall was augmented by domestic borrowing of N600 billion out of the approved N1.818 trillion plan.

Meanwhile, the naira has lost more than 2.5 per cent in value at the interbank market, closing at N313 per dollar yesterday from N302.10 it started.

Already, blame has been put on the market’s inability to attract local or foreign investors with the much-sought greenback, as transactions quickly dried up in anticipation of interest rate hike from the Monetary Policy Committee today.

The interbank market just transacted $8.64 million yesterday, a volume considered too insignificant when compared with $100.54 million recorded on Friday, although it was spurred by the apex bank’s intervention.

On Friday, the currency had first hit the lowest point of N331/$ since the introduction of the flexible exchange rate regime, before recovering ground at the end of the day to N300/$.

Two days after the maturity date, CBN settled its one-month forward contract worth $697 million, at the rate of N280/$, with outstanding forwards of $1.22 billion and $1.57 billion for two-month and three-month contracts respectively.

As a support to the falling confidence in the exchange rate, the one-month naira-dollar forward was quoted at N328/$, while one-year contract fell as low as N368/$.