₦airaland Forum

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 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.


www.punchng.com/30-oil-benchmark-subsidy-payment-split-senate/

On point

Having read everything, I think the Senators canvassing for a heavy borrowing are right on this one. Or fears are only that these monies would be embezzled but if not, then they should go ahead and industrialize the country.

2016 looks tough but our prayer Is that God will see us through.

Bruce is a 50trn naira madman. Which generation is going to pay back the money?

I love the emphasis on solid minerals and agriculture.

This is what we call improvement on our politics not just some set of people that will just approve the budget without scrutinising. We will surely get there it is a gradual process

Ben Bruce thinks of Nigeria as an ideal country or probably a developed and stable economy where impact of loans is felt in the economy. Buhari should continue with anti-corruption and Bruce should sponsor a bill for death penalty against corrupt public officers. We can borrow any amount if corruption is killed.

drberry:
Having read everything, I think the Senators canvassing for a heavy borrowing are right on this one.

To provide some perspective on the debt debate, let's consider the following:
(1) The debt to GDP ratio of the US is around 100% (i.e. over $17tn)
(2) The debt to GDP ratio of Japan is over 200%
(3) The debt to GDP ratio of Nigeria is currently around 2%
(4) If Nigeria borrows N50tn ($250bn), the debt to GDP ratio will be around 50%

The question is, if already developed & industrialized countries are taking up more debt to continue developing, does it not make even more sense for an underdeveloped country to rack up more debt to also further its industrialization and development?

On the surface, this might look as the logical thing to do, except that there are two major problems:
(1) An underdeveloped country has weak institutions to check corruption, so most of the funds might end up in the vaults of certain WITCHES, leaving future generations with a huge debt burden.
(2) The revenue of those developed countries is sufficient to service their debt repayment and their debt interest is very low (under 2%). At an interest rate of 13%, a debt of N50tn in Nigeria will require over N6tn annually for interest payment alone. When you consider that in the proposed 2016 budget, total revenue is projected at a paltry N3.8tn, then you can appreciate the folly in the Senators' proposal.

So, we need to first expand our revenue base before thinking of more debt, else investors will perceive the debt to have a high default and repayment risk. This perception will cause investors to demand for high interest to compensate for the risk or shun our bonds completely.

Our senators need to curb their enthusiasm, and look at hard facts before coming up with emotionally charged proposals.

Bevista:
To provide some perspective on the debt debate, let's consider the following:
(1) The debt to GDP ratio of the US is around 100% (i.e. over $17tn)
(2) The debt to GDP ratio of Japan is over 200%
(3) The debt to GDP ratio of Nigeria is currently around 2%
(4) If Nigeria borrows N50tn ($250bn), the debt to GDP ratio will be around 50%

The question is, if already developed & industrialized countries are taking up more debt to continue developing, does it not make even more sense for an underdeveloped country to rack up more debt to also further its industrialization and development?

On the surface, this might look as the logical thing to do, except that there are two major problems:
(1) An underdeveloped country has weak institutions to check corruption, so most of the funds might end up in the vaults of certain WITCHES, leaving future generations with a huge debt burden.
(2) The revenue of those developed countries is sufficient to service their debt repayment and their debt interest is very low (under 2%). At an interest rate of 13%, a debt of N50tn in Nigeria will require over N6tn annually for interest payment alone. In the proposed 2016 budget, revenue is projected at a paltry N3.8tn.

So, we need to first expand our revenue base before thinking of more debt, else investors will perceive the debt to have a high default and repayment risk. This perception will cause investors to demand for high interest to compensate for the risk or shun our bonds completely.

Our senators need to curb their enthusiasm, and look at hard facts before coming up with emotionally charged proposals.

Ok I think now I have a holistic appraisal of the situation. I think it now behooves on the FG to revitalize and rejuvenate our industries and even build new ones to expand our revenue base. Also they need to really checkmate loopholes of stealing and embezzlement of public funds. Thanks though for the enlightenment.

Pavore9:
I love the emphasis on solid minerals and agriculture.

We want more than just talks. What plans are on ground to really explore the potentials in them. You can't just wake up one day and start getting revenue from those sectors. What work has been put on ground to bring in money?

Bekwarra:
We want more than just talks. What plans are on ground to really explore the potentials in them. You can't just wake up one day and start getting revenue from those sectors. What work has been put on ground to bring in money?

It needs to go beyond talk. As for Agriculture which is more of my forte, practical steps must be taken to get millions of Nigerians interested in it. The world of Agriculture is so big as it has the capacity to absorb tens of millions of Nigerians....it is no rocket science as it is achievable within months when the will is there.

drberry:
Having read everything, I think the Senators canvassing for a heavy borrowing are right on this one. Or fears are only that these monies would be embezzled but if not, then they should go ahead and industrialize the country.

You better have a rethink. Those debths are accumulated on your head. But in the long run, the funds will find their way into private purses. Let them give us our Biafra b4 hanging themselves in their ignorantly prepared noose.

Pavore9:
It needs to go beyond talk. As for Agriculture which is more of my forte, practical steps must be taken to get millions of Nigerians interested in it. The world of Agriculture is so big as it has the capacity to absorb tens of millions of Nigerians....it is no rocket science as it is achievable within months when the will is there.

It should have reflected in the 2017 budget and not 2016 . There's nothing on ground yet. You don't just wake up today that you want to start earning from Agriculture without putting anything on ground.

Bekwarra:
It should have reflected in the 2017 budget and not 2016 . There's nothing on ground yet. You don't just wake up today that you want to start earning from Agriculture without putting anything on ground.

It is up to them to show us Nigerians how they intend going about it.

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.”

Smartest comment. Ekweremadu was a disappointment with his unintelligent argument. Next year, the global price for oil will drop to $15 or $20.

Bevista:
To provide some perspective on the debt debate, let's consider the following:
(1) The debt to GDP ratio of the US is around 100% (i.e. over $17tn)
(2) The debt to GDP ratio of Japan is over 200%
(3) The debt to GDP ratio of Nigeria is currently around 2%
(4) If Nigeria borrows N50tn ($250bn), the debt to GDP ratio will be around 50%

The question is, if already developed & industrialized countries are taking up more debt to continue developing, does it not make even more sense for an underdeveloped country to rack up more debt to also further its industrialization and development?

On the surface, this might look as the logical thing to do, except that there are two major problems:
(1) An underdeveloped country has weak institutions to check corruption, so most of the funds might end up in the vaults of certain WITCHES, leaving future generations with a huge debt burden.

(2) The revenue of those developed countries is sufficient to service their debt repayment and their debt interest is very low (under 2%). At an interest rate of 13%, a debt of N50tn in Nigeria will require over N6tn annually for interest payment alone. When you consider that in the proposed 2016 budget, total revenue is projected at a paltry N3.8tn, then you can appreciate the folly in the Senators' proposal.

So, we need to first expand our revenue base before thinking of more debt, else investors will perceive the debt to have a high default and repayment risk. This perception will cause investors to demand for high interest to compensate for the risk or shun our bonds completely.

Our senators need to curb their enthusiasm, and look at hard facts before coming up with emotionally charged proposals.

No to borrowing, despite all the borrowing what happened to Greece? so the era of endless IMF INHUMAN ECONOMIC CONDITIONALITIES LIKE S.A.P. is gradually creeping back on this country?.
It shall never be well with any member of the political class who contributed to the looting of the Nigerian foreign reserve, and those who divert the country's income into private pockets.
OUR PEOPLE NEEDS TO STAND UP AND SAY NO THIS TIME AROUND, LET US CONTINUE TO LIVE WITHIN OUR MEANS WHILE BABA RECOVER STOLEN MONEY AND THE ECONOMY IMPROVES PERIOD.

Levinelsonbob:
You better have a rethink. Those debths are accumulated on your head. But in the long run, the funds will find their way into private purses. Let them give us our Biafra b4 hanging themselves in their ignorantly prepared noose.

Now I think you should be the one having a rethink? So your solution now is the creation of Biafra?? I don't think I should even be replying you. So you think "if" Biafra is created, they won't borrow as well or even steal public monies?? I laugh at you if so....