FG Pegs oil benchmark at $38 per barrel, 2.2m barrels per day for 2016

The Federal Government on Monday pegged the benchmark oil price for the 2016 budget at $38 per barrel with an estimated daily output of 2.2 million barrels, in a new three-year expenditure framework- the first in President Buhari’s administration, and subject to National Assembly approval.

Buhari’s government plans to spend some N6 trillion to boost the ailing economy in 2016 and most of that- at least 70 percent or N4.2 trillion would be spent on recurrent expenditure, while the remaining N1.8 trillion would go to capital expenditure.

At the Federal Executive Council (FEC) meeting in Abuja yesterday, the first since cabinet inauguration in November, Buhari and his ministers adopted the Medium Term Framework (MTEF), Government’s spending plan, which will set the economic policy for the next three years.

The document proposes an expansionist budgetary spending to N6 trillion in 2016, increasing by N1trillion from last year’s, which was N5trillion including the supplementary.

“We project and are working with a $38 per barrel crude oil price, we consider that to be very conservative, but because of the uncertainties we feel we should start with a conserved price,” said Udoma Udo Udoma, minister of Budget and National Planning, briefing journalists on the outcome of the FEC meeting which ended Monday evening.

“We also are working with 2.2million barrels per day production. We feel it is achievable because of the PIB (Petroleum Industry Bill) we are working to achieve,” he said, adding that government would stick to the exchange rate earlier fixed (N197 to a US dollar) by the Central Bank of Nigeria.

The MTEF which sets the economic underpinning for the next three years, now awaits approval by the National Assembly, according to Udo-Udoma who briefed journalists, alongside Lai Mohammed, minister of information.

“All the increases will be spent on capital, because there is a need to increase the capital spend because of our infrastructure issues that we have to address” Udoma said, adding that capital for the 2016 budget would be about 30%.

To fund the budget, government intends to explore an increase in non oil revenue, cutting down on recurrent expenditure by saving from overheads, as well as ensuring that revenue collection agencies are more efficient, but government will not embark on pay cut.

“We will get the funding from two things. One, we are looking at increasing our non-oil revenue, trying to get more money from various government agencies, policing their collections and trying to get more money from them. We will also look at keeping down our recurrent , that means we will look at savings that we can make from overheads.

“We will also look at efficiencies from our revenue collecting agencies, the FIRS in terms of companies income tax, in terms of VAT and then the difference will have to come from borrowing. But the level of borrowing that we anticipate and we are projecting will be well within the maximum that we allow which is 3% of the GDP because we want a prudent budget” he said.

While not clearly stating if government would embark on a tax increase, the minister insisted that all corporate entities must be made to pay

tax.The minister also noted that government is still undecided on the issue of subsidy removal, as it was still working on it.

Elizabeth Archibong