2017 Budget: Oil price benchmark will reduce budget deficit

crude oil

crude oil

Prof. Uche Uwaleke of Nasarawa State University, said the increase in crude oil price benchmark for 2017 Budget as proposed by the Senate would reduce the N2 trillion deficit in the Appropriation Bill.

Uwaleke stated this in an interview with the News Agency of Nigeria (NAN) in Abuja on Tuesday.

He said that the adjusted benchmark from 42.5 dollar per barrel of oil to 44.5 dollar per barrel by the upper chamber was realistic, given the current price and future projections in the international market.

President Muhammadu Buhari presented the 2017 Appropriation Bill to the National Assembly on Dec. 14, 2016, with projected oil revenue at N1.99 trillion, on price benchmark of 42.5 dollars per barrel.

The President had also presented the Medium Term Expenditure Framework (MTEF) and Fiscal Strategy Paper (FSP) with same price benchmark.
The MTEF and FSP were designed to serve as Nigerian’s fiscal framework from 2017 to 2019.

But, the Senate, while approving the MTEF and FSP on Thursday, fixed the oil price benchmark for 2017 at 44.5 dollars per barrel but retained the N305 to a dollar exchange rate proposed by the executive.

To this end, Uwaleke, a professor of banking and finance, explained that the adoption of an exchange rate of N305 to the dollar for the budget was also realistic.

He said that the adjusted oil price benchmark and the retention of the exchange rate level would help to reduce the size of the borrowing required to finance the deficit in the budget.

He said that the oil price forecast by the international oil organisations for 2017 was in consonance with the adjusted benchmark adopted by the senate.

“This is in view of the fact that oil price forecast by reputable international energy agencies such as the US Energy Information Administration is above 50 dollar per barrel on the average for 2017.“

The professor said that the decision by the Organisation of Petroleum Exporting Countries (OPEC) to cut oil production output in 2017 had also made the senate adjustment a welcome development.

He said that it was important for the red chamber to give accelerated hearing to the 2017 Appropriation Bill and expeditiously approve it on time.

“Now that the MTEF has been approved, I expect the National Assembly to commence immediately the 2017 budget proposal consideration to ensure its early passage.’’



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