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2020 Budget: Senate jerks up oil price benchmark to $28

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ABUJA – The Senate on Tuesday jerked the price of crude to $28 per barrel as against the $25 per barrel proposed by the Executive in the revised Medium Term Expenditure Framework ( MTEF) and Fiscal Strategy Paper ( FSP) forwarded to it for approval.

According to the Senate, the increase became very imperative due to the recent upward trend of the crude oil market which, as today, stood at $38 per barrel with a very strong expectation that the price will rise to as $40 to $45 per barrel. The Senate specifically called on the Central Bank of Nigeria, CBN to ensure that there was no further devaluation of the Naira against the dollars while the Executive should strongly ensure diversification of the economy.

The approval was sequel to the consideration of the report of the Senator Olamilekan Adeola, All Progressives Congress, APC, Lagos West led Senate Committee on Finance on the 2020-2022 Medium Term Expenditure Framework (MTEF) and Fiscal Strategy Paper (FSP) in line with the Fiscal Responsibility Act 2007. The Upper Chamber also reduced from 1.9million barrel per day to 1.8million barrel per day, oil production proposed by the executive in the MTEF/FSP documents, just as it declared that money kept in the Natural Resources Development Accounts was total waste.
The Senate retained some critical parameters like exchange rate of N360 to a US dollar, 14.43 inflation growth rate and 4.42 Gross Domestic Product, GDP growth rate. Other assumptions cum proposals retained are N5.09 Trillion FGN’s revenue, N10 .51 trillion proposed expenditure, N4.95 Trillion fiscal deficit, N4.17 Trillion new borrowings ( including Foreign and domestic Borrowing.

Others are N398.5 Billion as Statutory transfers, N2.68 Trillion for debt serving, N272.9 Billion as sinking fund, N536.7 Billion for Pension and gratuities. At the end of the consideration, the Senate also retained the Critical components of the proposal as presented by the executive with adoption of N10.51 Trillion as total expenditure, N4.93 Trillion as total recurrent, N2.83 Trillion for personnel cost and N2.23 Trillion for capital expenditure. Presenting the report, Senator Adeola said that the increase effected on the oil price benchmark was as a result of the recent upward trend of the crude oil market which as at today, stood at $38 per barrel with a very strong expectation that the price will rise to as $40 to $45 per barrel.

According to the Finance Committee Chairman, the Committee recommended the following: That the price of crude be increase to $28per barrel as against the $25 per barrel proposed by the executive. This is as a result of the recent upward trend of the crude oil market which as today stood at $38 per barrel with a very strong expectation that the price will rise to as $40 to $45 per barrel. “That the oil production output be sustained at 1.8 Million per barrel day as proposed by the executive as this was the decision of cutting production by OPEC which Nigeria is a member. “That due to current realities and downturn in the global economy the N360 /US $ 1 as proposed in the MTEF amendment by sustained with continuous effort by the Central Bank of Nigeria to stabilize the exchange rate ensures to no further devaluation of Naira against the dollars and also call on the Executive for strong diversification of the economy. “That the sum of N500 Billion intervention fund drawn from various special accounts, and with the utilization of the fund clearly stated, and projects already added to the proposed revised 2020 budget send to the National Assembly be approved by the Senate. “That the deficit of N4.95 Trillion as stated in the observation of the Committee be approved. The deficit will largely be financed from new borrowings estimated at N4.17 Trillion. It is expected that N1.98 Trillion of the new borrowings will be from external (multilateral) concessional sources, mainly the IMF, World Bank, African Development Bank and Islamic Development Bank. New Domestic debts totalling about N593.89 Billion will also be sourced for the 2020 budget. In addition, N126.04 Billion will be derived from Privatization proceeds, N263.63 Billion will be sourced from the Federal Government’s Special Accounts to fund Covid-19 expenditures, and M387.30 Billion will be drawn down on multilateral/bilateral loans secured for specific development projects.

Reference: Read more at: https://www.vanguardngr.com/2020/06/2020-budget-senate-jerks-up-oil-price-benchmark-to-28/