News
Nigeria: Dispute over gov’t spending delays Goodluck Jonathan budget
The House of Representatives and the Senate last week each proposed amendments that would inflate the benchmark to US$79 and US$76.5 a barrel, respectively. Both moves, by increasing the price, would boost budget spending but reduce savings meant to shield the economy from oil price and production shocks.
The Senate report criticizes the “the continuous building up of the nation’s external reserve above the internationally recognized standard of 3 months imports, at the expense of the provision of critical infrastructure.”
The excess crude account only holds around US$3.3 billion, compared with US$9 billion in December last year.
Yet the report, somewhat inconsistently, also complains that spending down of NGN700 billion (US$4.4 billion) from the excess crude account is built into the budget, which effectively, it says, raises the benchmark price to US$80 anyway.
It goes on to bemoan Nigeria’s rising debts.
Bismark Rewane, economist and CEO of Lagos-based consultancy Financial Derivatives, said with oil prices likely to fall next year and oil theft to continue hurting production, a benchmark of US$70 a barrel would be more prudent.
