FG adopts $42.5 oil benchmark, N290/$ exchange rate

The Federal Government has commenced work on the 2017 Appropriation Bill with the Federal Executive Coun­cil (FEC) yesterday approving a three-year fiscal framework that pegs a benchmark of $42.5 per barrel of crude oil in next year’s budget.
This is contained in the Me­dium Term Expenditure Frame­work (MTEF) and Fiscal Strategy Paper (FSP) both for 2017-2019 approved by the FEC - in line with the Fiscal Responsibility Act - at its meeting chaired by President Mu­hammadu Buhari.
The framework also fixed the benchmark of $45 and $50 per barrel of crude oil for 2018 and 2019 Budgets, respectively.

Global crude oil price cur­rently hovers around $50 per bar­rel.
Also approved was a crude oil production target of 2.2 mil­lion barrels per day (mbpd) for 2017; 2.3 mbpd for 2018 and 2.4 mbpd for 2019.
Economic growth rate is tar­geted at three percent, 4.26 per­cent and 4.0 4 percent respective­ly for 2017, 2018 and 2019; while a flat foreign exchange rate of N290 to a dollar was proposed.
Explaining these projections to newsmen after the FEC meeting, the Minister of Budget and Nation­al Planning, Udoma Udo Udoma, said the growth projection for 2019 declined from the previous year because it will be an election year when investors are usually cautious about their expenditures.
Asked why so there was so much emphasis on crude oil earn­ings when the administration is talking of diversifying the econ­omy, the Minister said that there would be no back-pedalling on di­versification but the government would not go back to using high oil price estimates “even though we sense that prices may be mov­ing towards $60 per barrel in the next year or so”.
He noted that estimates for crude oil earnings were bench­marked because of the volatility of the price of the product.
Udoma stressed that “we are keeping to being very conservative in terms of the reference price of crude oil even though we are ex­pecting it to go higher than this but we are keeping to an extremely conservative price scenario”.
He said the private sector, gov­ernors and Non-Governmental Organisations were widely con­sulted in arriving at the estimates and that greater focus would be placed on good governance, secu­rity and infrastructure like roads, rail and ports while government will sustain zero-budgeting meth­ods.
His words: “In the 2017-2019 MTEFF, the government intends to intensify efforts in pursuing manpower-driven economy. So, we intend to intensify effort to di­versify the economy, go on with the implementation of ongoing re­forms in public finance, enhance the environment for ease of busi­ness so as to generate private sec­tor and private investment.
“We intend to continue to pur­sue gender sensitive, pro-poor and all-inclusive social interven­tion schemes similar to what we did in 2016; our social interven­tion programmes are going to be sustained.
“We intend to devote even more resources to critical infra­structure projects just as we did this year. So, we will continue to spend more on roads, rails, trans­port infrastructure, ports and so on. We intend to focus on govern­ance and security and we intend to maintain the zero-based budget­ary approach.”
Udoma said the FEC did not discuss the controversial propos­al for emergency economic powers which Buhari’s Economic Man­agement Team, chaired by Vice-President Yemi Osinbajo, is con­sidering for the quick resuscitation of the national economy.
However, on the level of im­plementation of the 2016 Budget, the Minister said that “in terms of the capital budget, we have re­leased over N400 billion and we are up to date in terms of the re­current. All salaries have been paid, overheads have been released and statutory transfers made.”
Meanwhile, the FEC also ap­proved that Nigeria should rati­fy the World Trade Organisation (WTO) Trade facilitation agree­ment.
The Minister of Trade and In­vestment, Dr Okechukwu Enel­amah, explained that the agree­ment, which was approved at WTO’s ministerial conference in 2013, seeks to lower the cost of trade among member-nations.
“It is particularly beneficial to developing countries that want to be able to access the internation­al market. Nigeria was one of the countries that approved the agree­ment then and we have been go­ing through the process to ratify the agreement so that it will come into effect.
“The idea is that the agree­ment will come into effect when it is ratified by two-thirds of all the countries that approved it origi­nally; we think that will happen sometime this year,” he stated.