THE OIL BENCHMARK CONTROVERSY, OUR POSITION
BY FEMI GBAJABIAMILA
Yet again like previous years, the oil benchmark for the 2014 budget has generated its perennial controversy with experts and politicians weighing in with different reasons why it should be a particular figure.
The House of Representatives has maintained that the benchmark should be maintained at last years figure of $79 per barrel whilst the executive agreed to $76.50 with the joint committees of both Houses of the National Assembly even though they (the executive) had wanted it fixed at $74. The Senate has passed a $76.50 benchmark. However the progressives across party lines in the House insisted on $79 and carried the day on the floor during the debate and consideration of the joint committee report.
For the purpose of accountability, those of us in the House with a progressive bent feel it is necessary to explain to Nigerians reason for the position we have taken. 1. The Medium Term Expenditure Framework is a 3 year rolling plan and not an annual plan or guide to the budget. It is conceptualized to be the basis for the budget for the next three years and unless there is a major and compelling reason for a change in assumptions and projections in any given year, there cannot and should not be any material change to the MTEF especially within its first year. Indeed section 16(2)of the Fiscal Responsibility Act states:
“Any adjustment to Medium Term Expenditure Framework shall be limited to: a. The correction of manifest error, b. Changes in the fiscal indicators, which in the opinion of the President are significant ”
We must recall that the issue of benchmark perhaps generated the biggest controversy last year and $79 was eventually agreed to by both chambers of the National Assembly. The parameters and assumptions for last year’s $79 have not changed with the price of oil maintained at over 100dollars per barrel. As a matter of fact the overall oil and non oilrevenue projection was met and surpassed in spite of the crude theft claimed by government. For us therefore to suddenly change the benchmark from $79 to 74 or 76.50 as proposed by the Executive and the Senate respectively seemed whimsical at best. What then was the point of a MTEF based on a 3 year rolling plan. We may as well scrap the MTEF and just continue with our annual budgeting proposals or change its name to Annual or Twelve Month Expenditure Framework. To accept to drop last year’s benchmark by about 4 or 5 dollars when nothing has changed may also suggest that a House that fought and argued passionately for a higher benchmark just a few months ago was unserious, did not understand the issues and lacked the courage of its conviction. It could also suggest underhand dealings as is often the accusation leveled against the National Assembly.
2. We felt that though the National Interest is what is most important in our decisions, we also represent states in a true federal structure. To this end, we took cognizance of the fact that a lower benchmark necessarily in the way the federal government operates our revenue, means less money to the states and more money to the Federal government. How? When you fix a benchmark at for instance $74, it means all oil revenue above $74 is transferred to some phantom excess crude account. So if for instance oil sells at $100 (which it has in the last 5 years or more), the remainder $26 is transferred to the excess crude account purportedly for savings and to be shared amongst the three tiers of government at a later date. It is pertinent to note that for months now, the states as usual have gone cap in hand to the federal government to ask for their share of the excess crude oil and across party lines have cried out that the federal government has either refused and neglected to pay them or short changed them somehow. Now if the federal government is unable to pay states from a higher benchmark of $79 last year, how do they intend to do it with a smaller intake at $76.50. Surely at that point the states will become comatose. States have continued to complain of difficulty in paying their bills on a regular basis due to this impoundment of their monies by the federal government. More alarming is the revelation just recently by the governors that 5billion dollars has recently disappeared from the Excess crude account. The House felt it would amount to negligence and possible malpractice knowing the consequence of a lower benchmark to the states they represent to sit down and short change the states for the benefit of the federal government without any compelling argument so to do. It is important to note that the excess crude account is an illegal and unconstitutional account going by the provisions of section 162 of the constitution.
