The Federal Government has proposed $78 as the benchmark price for a barrel of crude oil and fixed the exchange rate at N160 per dollar for the 2015 national budget.
The projection, which was contained in the Medium Term Expenditure Framework (MTEF) and Fiscal Strategy Paper (FSP) sent to the Senate by President Goodluck Jonathan on Wednesday, was $4 higher than this year’s benchmark.
Jonathan had last year proposed $74 as the benchmark price for the 2014 budget but both chambers of the National Assembly, after several days of disagreement, finally put it at $77.5 per barrel.
The MTEF and FSP are also proposing a reduction in capital expenditure and a rise in recurrent expenditure in 2015. Capital expenditure has been pegged at N1.436 trillion as against N1.552 trillion in 2014 budget, while recurrent expenditure was pegged at N2.622 trillion as against N2.40 trillion in the 2014 budget.
The government also projected N4.896 trillion and N5.028 trillion as expenditure for 2016 and 2017 respectively. Also, recurrent expenditure was pegged at N2.657 trillion in 2016 and the same amount in 2017, while capital expenditure including Sure-P was pegged at N1.531 trillion in 2016 and N1.662 trillion in 2017.
The Federal Government yesterday also projected N11.163trillion revenue for next year as opposed to N10.894 billion approved for this fiscal year.
According to the 2015-2017 (MTEF) and Strategic Paper Policy, N7.286 trillion is also expected from the federally collectible oil revenue next year as against N7.164 trillion approved in the Appropriation Act for this year.
The document stated that the value of United States (U.S.) import of Nigeria’s crude oil dropped by about 69 per cent from $38 billion in 2008 to $12 billion last year, adding that crude oil production in the U.S. would average 9.3 million barrels per day (bpd) next year.
“It is estimated that crude production in the US will average 9.3 million bpd in 2015. It will be its highest level since 1972. This will put further pressure on oil prices.”
Nigeria has been witnessing declining revenues as a result of falling crude oil prices and drop in oil production caused by shut-in from illegal activities in the oil sector.
By Tuesday, October 14, the price of OPEC basket of 12 crudes stood at $85.14 a barrel, compared with $85.93 the previous day, according to OPEC secretariat’s calculations. This indicated barely a $7.6 difference from the $77.5 per barrel approved for the 2014 budget.
The government noted in the fiscal document that the global supply-demand balance of crude oil was editing out the recent spikes in oil price, with increasing supply arising from the exploitation of shale oil and gas, Iranian oil sanctions suspension as well as the emergence of new regional producers and global surplus crude oil capacity, which had increased modestly in recent times.
However, the MTEF noted that oil production had been estimated at 2.3271 million bpd and 2.4067 million bpd for 2016 and 2017, respectively.
“These projections are indicative of government’s position to improve actual production capacity of the oil sector,” it added.
The document further stated that the rising United States oil output has had great impact on the market as crude prices hovered around $110 per barrel in the last three years despite OPEC’s production disruptions.
It noted that almost all the production losses over the past few years had been replaced by the US Shale boom and increased Canadian production.
The MTEF further stated that Nigeria’s debt stock was the equivalent of about $65.26bn as of March 2014, with the Federal Government responsible for about 80 per cent, while the 36 states and the Federal Capital Territory accounted for the balance.
The scenario, according to the document, implies a debt to Gross Domestic Product ratio of 12.8 per cent.
“The total debt stock is comprised of external debt stock of $9.17bn and domestic debt stock of $56.09bn,” it added.