2014: FG Projects N4.5tn Budget, Sets Oil Benchmark at $74/bl

President Goodluck Jonathan

By Omololu Ogunmade  

The federal government is set to propose a budget of N4.495 trillion for the fiscal year 2014 that will be predicated on an oil revenue benchmark of $74 per barrel.

While the proposed budget projection translates to a N492 billion reduction from the N4.987 trillion appropriated by the National Assembly in the 2013 budget, the 2014 oil benchmark of $74 per barrel also marks a reduction of $5 per barrel from the $79 in the 2013 budget.

The budget proposal is contained in the Medium Term Expenditure Framework (MTEF) and Fiscal Strategy Paper (FSP) sent by President Goodluck Jonathan to the National Assembly Tuesday and obtained exclusively by THISDAY  Wednesday.

The MTEF and FSP are also proposing a reduction in capital expenditure and a rise in recurrent expenditure in 2014. Capital expenditure has been pegged at 26 per cent, while recurrent expenditure is pegged at 74 per cent.

In the 2013 Appropriation Act, recurrent expenditure was pegged at 68 per cent, while capital expenditure was put at 32 per cent.

According to the expenditure framework, the reduction in capital spending in 2014 is the fallout of the government’s projected reduction in revenue in 2014.

“It is essential to note that the level of outlay of personnel cost is crowding out expenditure on capital spending needed to develop the nation and constitutes a major drain on public resources.

“Even now, there continues to be pressure for higher emoluments, pensions, etc. This is clearly unsustainable and would need to be addressed,” said the federal government in the expenditure framework stated.

Although the Senate had set next Tuesday for the debate on the MTEF, THISDAY’s examination of the 2014 budget proposal also revealed that the federal government has pegged oil price for 2015 and 2016 fiscal years at $75 and $76 per barrel respectively and as well put budget projections for 2015 and 2016 at N4.743 and N4.839 trillion respectively.

The fiscal document stated that in arriving at the decision to bench oil prices at $74 per barrel in 2014, the government took cognisance of “the weakening future prices occasioned by rising oil theft and unconventional oil supplies as well as slow economic recovery.”

While noting that government’s model of 15 and 10 years moving benchmark averages have produced a figure of $71.96 which it said was adjusted in consideration of the behaviour of future prices, the document states further that whereas in the last decade, oil prices rose to record levels and peaked at $48 per barrel in July 2008, it has since been sliding downwards since 2012 with a looser demand-supply balance.

The government also disclosed that after extensive consultations with the Nigerian National Petroleum Corporation (NNPC), and in observance of persistent oil theft, illegal bunkering and other production challenges, it had opted to project crude oil production for 2014 at 2.3883 million barrels per day.

The projected crude oil production at 2.383 million barrels per day in 2014 is 143,000 barrels per day lower than the 2.526 million barrels per day in the 2013 budget.
The fiscal paper further showed that the government is projecting a 6.75 per cent Gross Domestic Product (GDP) growth in 2014, a slight increase from 6.5 per cent in 2013.

GDP growth, the federal government stated, would be driven by strong performance in agriculture, wholesale and retail, construction and real estate sectors, among others.
The document also stated that expected revenue from non-oil sectors in 2014 is benchmarked at 25 per cent of total revenue.

In a related development, the Senate announced yesterday that it would open a debate on the comment credited to the Minister of State for Finance, Dr. Yerima Ngama, that the 2013 budget was no longer implementable.

Raising a point of order on the matter yesterday, Deputy Senate Leader, Abdul Ningi, said the statement was misplaced, more so, when the price of oil has not fallen below the $79 benchmark and no report had been officially made about poor production capacity.

Ningi said the minister’s statement was an indictment on the National Assembly, which legislated on the budget.

In taking a decision of Ningi’s observation, the Senate which viewed the comment as outrageous, agreed to debate the matter today.