Despite falling Oil Prices, Nigeria's FG Sets 2015 Budget Benchmark at $78/bbl
In spite of falling oil prices, the federal government has proposed an oil benchmark of $78 per barrel for the 2015 budget, 0.50 cents higher than the $77.50 per barrel approved by the National Assembly in the 2014 budget and fixed the exchange rate at N160 per dollar for the 2015 national budget.
The federal government’s rather optimistic oil benchmark is bound to raise eyebrows, as market analysts are predicting that the price of crude would fall below $80 a barrel due to slowing global demand and the rise in US shale oil production.
The 2015 oil benchmark was reflected in the Medium Term Expenditure Framework (MTEF) and Fiscal Strategy Paper (FSP) sent by President Goodluck Jonathan to the National Assembly on Monday and read on the floor of the Senate yesterday.
In the MTEF/FSP, the federal government has also proposed a budget of N4.817 trillion for the 2015 fiscal year that will be predicated on the oil benchmark of $78 per barrel and an exchange rate of N160.00 to a dollar.
The more recent narrowing of the spread since September is largely the result of declining Brent prices caused by a combination of lower demand and increased supply. Economic growth in Asia and Europe has been lower than expected. Sustained increases in Libyan crude oil production plus higher U.S. crude production that has backed out U.S. imports are raising crude supply in the global market according to the EIA.
Nigerian Finance Minister, Dr. Ngozi Okonjo-Iweala, disclosed in Washington DC, recently that the World Bank tasked the Federal Government on the need to increase its fiscal buffers by building external reserves to about $6.3 billion, up from the present level of $4.1 billion. She reportedly stated that there had been a contingency plan to ensure that the economy does not suffer in spite the drop in global oil price.