$30 oil benchmark, subsidy payment split Senate

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Senators on Wednesday disagreed on the $38 per barrel oil proposed by the Federal Government as the oil benchmark for the implementation of the 2016 budget which was contained in the Medium Term Expenditure Framework and Fiscal Strategy Paper forwarded to the upper chamber on Tuesday by President Muhammadu Buhari.

The senators also expressed divergent views on the continued payment of subsidy by the Federal Government in the next fiscal year going by the current hardship being faced by Nigerians as a result of the current fuel scarcity in the country.

While some senators who spoke during the debate on the document agreed with the Federal Government’s position on oil benchmark was because of the falling global oil price, others believed that many state governments would be thrown into further financial mess if the benchmark was not increased.

The Deputy Senate President, Ike Ekweremadu, who opened the debate, noted with regret that the usual habit of the executive to submit both the MTEF and the annual budget to the National Assembly late every year was counter-productive.

He insisted that the unwholesome act usually forced the legislature to carry out shoddy jobs, which he maintained, was not good for the critical consideration of the annual financial document.

He said there was the need to raise the oil benchmark from $38 to $40 per barrel, describing the $38 per barrel benchmark proposed by the executive as conservative.

Ekweremadu expressed the hope that the global price of crude oil had the potential to rise to about $55 per barrel in the next fiscal year.

He said that increasing the benchmark to $40 per barrel would be of immense help to many states of the federation which he said had been struggling to pay salaries.

But Senator Adamu Aliero (APC Kebbi Central) said $40 per barrel was unrealistic because “from what we have been hearing, oil price may continue to fall even below $38 to $34.”

He said, “I will recommend that we take $35 per barrel. It is not time for Nigeria to take a firm stance on the diversification of our economy; we can no longer rely on oil as the major source of our revenue.”

Also Senator Ahmad Lawan, (APC, Yobe North), said the government’s decision to peg the oil benchmark at $38 was in order.

He said, “We can do better in the next few years having suffered in the last couple of years. It is likely that the prices of oil will improve so we should retain the $38 per barrel proposed.”

He urged that other sources of revenue generation should be tapped into to fund the budget.

However, Senator Solomon Olamilekan believed that the $38 oil benchmark should be retained but that the committee should still reconsider the implications.

He faulted the 30 per cent for capital development, stressing that it should be 40 per cent, in order to engender rapid development.

Senator Jibrin Barau disagreed with calls for the removal of fuel subsidy, describing it as a kind of welfare arrangement for Nigerians.

He berated the United States for asking Nigeria to remove oil subsidy when the country (US) had a lot of welfare packages for its citizens.

In his submission, the Chairman, Senate Committee on Finance, Senator John Eno, noted that the bulk of the revenues for the funding of the budget would come from non-oil sources, describing the move as a departure from the known tradition when budgets were prepared on the basis of projected revenue from the oil sector.

He, however, expressed concerns that the document placed more emphasis on solid minerals and agriculture without considering industrialisation.

Senator Solomon Adeola (Lagos West) frowned on the government’s N1.8tn projected borrowing in 2016, saying piece-meal borrowing would not be healthy for the nation’s development. He advocated the need for heavy borrowing to drive rapid development.

He noted that Brazil developed its economy through borrowing, and that by Nigeria’s recourse to meagre borrowing plan in 2016, the Federal Government would soon return to the National Assembly to seek permission to borrow more.

Also speaking, Senator Ben Murray-Bruce (Bayelsa East), lamented that the 2016 projection was not better than 2015 budget estimates, and advocated for the deregulation of the petroleum sector.

He, however, said that the Federal Government must make adequate arrangements to cushion the effect of the action.

He canvassed the need to borrow heavily to the tune of N50tn for the rapid transformation of the nation’s industrial sector.

He also canvassed the need by the National Assembly to review the budget every three months.

He said, “This budget is not different from last year’s budget. There is disparity largely in the area of exchange rates. All successive governments have made the wrong argument on deregulation.

“The correct price of petrol is usually found in Abuja, Lagos and Port Harcourt. Government should ask what the price of transportation is, not how much a litre of petrol is.”

“We should think of a mass transit policy which will cost not more than N100bn which is about 10 per cent of what we spend of subsidy.

“If you spend the same amount of money on transportation after deregulation, nobody will protest on the street. Nobody in the United Kingdom or United States knows the price of petrol but in Nigeria, everybody knows because we have made the wrong arguments.

“If you have to borrow N50trn, then borrow it and industrialise Nigeria over night. We must look at the budget every three months and adjust it as we go on. It doesn’t matter who the president is, our interest should be Nigeria.”

Senator Tayo Alasoadura (Ondo Central) said borrowing in trickles does not promote development, explaining that huge borrowing which spans 50 years will go a long way to foster growth and development of the economy.

Senator Barnabas Gemade (Benue North-East) said huge borrowing would give Nigeria the platform to advance the nation’s economy.

According to him, people are always aggrieved about borrowing because the purpose was usually being misplaced.

He noted that if borrowing was geared towards enhancing internal production, Nigeria’s economy will rise to the level of Japanese and Brazilian economies.

Gemade also cited China as one of such nations which he said borrowed to transform their economies.

Senator Albert Bassey (Akwa Ibom North-East) advocated outright removal of fuel subsidy, regretting that the pump price of fuel was being sold at N87. 00 only in Lagos, Abuja and Port Harcourt.

He also stated that in Akwa Ibom and several other states, fuel was being sold at the the pump price of N97.00.

“Where then lies the interest of Nigeria on subsidy in this?” Bassey asked.

The document was referred to the committees of Finance and National Planning with the mandate to report back to the Senate next Tuesday.

The Senate also confirmed the appointments of Mr. Babatunde Fowler as the new Director-General of Federal Inland Revenue Service.

Source: Punch