National Assembly Adopts $79 Oil Benchmark for 2013 Budget

House wants Sept 30 deadline for budget presentation N’Assembly probes NNPC’s N48bn extra expenditure

By Onwuka Nzeshi and  Dele Ogbodo and  Jude Okwe

After weeks of disagreement, the two chambers of the National Assembly yesterday harmonised their divergent positions and adopted $79 per barrel as the recommended oil benchmark  for the 2013-2015 Medium Term Expenditure Framework(MTEF) and Fiscal Strategy Paper.

The harmonisation came same day the House of Representatives considered the report of its Committee on Debts, Loans and Aids on external loans and recommended  $7.3 billion as the ceiling for the external borrowing plan under the 2012-2014 MTEF.

The lower chamber of the National Assembly also recommended the inclusion of the second tranche of $200 million World Bank loan for Lagos State in the plan.

In the same vein, the House’s Committee on Legislative and Budget and Research is proposing an amendment to Section 81 of the Constitution to make it mandatory for the president of the country to present the Federal Government’s budget for the succeeding year on September 30.

President Goodluck Jonathan had in line with the Fiscal Responsibility Act proposed to the National Assembly the sum of $7.905billion as its external borrowing plan.

The executive arm was later to propose a review of the plan, bringing the amount to $9.205 billion. The lawmakers, however, slashed it to  $7.356 billion comprising $6.2 billion for federal and states loans; $1billion for the Eurobond issue and $0.1billion for the proposed Diaspora Bond.

Jonathan had also predicated the 2013 -2015 MTEF and Fiscal Strategy Paper on an oil benchmark of $75 and had based the 2013 Appropriation Bill on the same benchmark.

However, controversy arose when the House and the Senate adopted $80 per barrel and $78 per barrel respectively during the consideration of the proposals in their separate chambers.

This divergence of positions on the matter resulted in the setting up of a Joint Conference Committee in the National Assembly to explore the possibility of reaching a common position.

After extensive deliberations and consultations by the conference committee, a harmonised report was adopted yesterday, recommending $79 per barrel as the appropriate oil benchmark price.

According to the report, the additional funds arising from the $4 increase over and above the $75 proposed by the executive will be used to reduce domestic borrowing and the budget deficit as well as funding critical infrastructure projects.

The report stated that after a thorough scrutiny of the two versions of recommendations, the conference committee adopted the recommendation by the Senate as follows: “The Federal Government should exercise extreme caution on foreign borrowing; and Corporate Tax and VAT rates of thirty per cent (30%) and five per cent (5%) respectively be adopted for 2013-2015.

“The Comprehensive Import Supervision Scheme (CISS) Account be transferred to Nigerian Customs Service (NCS); reject the structures being set-up in states, senatorial zones and local governments in respect of Federal Government SURE-P intervention programmes; and the details of SURE-P to be executed under the programme be attached as an addendum for annual appropriation for scrutiny and approval of the National Assembly.”

The conference committee further adopted the recommendation by the House that crude oil production level be retained as 2.526 million barrels per day (mbpd) for 2013, 2.611mbpd 2014 and 2.648mbpd 2015 as well as an increase in the revenue target of the NCS for 2013.

The Senate also agreed with the House that the Federal Government must take urgent steps to review all laws that allow its agencies to expand their revenue with little or no operating surpluses.

“Government should increase funding for frontier exploration services to increase the nation’s crude oil resources; and government and its agencies must comply fully with the Fiscal Responsibility Act.

“The sustenance of people in the Niger Delta should be given priority attention and prominence, in order to guarantee un-jeopardised production of crude oil.

“The use of an integrated Payroll and Personnel Information system (IPPIS), which commenced some time ago, should cover all ministries, departments and agencies (MDAs), in order to effectively reduce the wage bill in line with the overall objective of reducing recurrent expenditure.

“The habit of poor budget implementation and return of unspent funds will continue in the medium term, this indefensible fiscal habit is at variance with the hallmarks of best practices and should not be encouraged, government must ensure full implementation of the budget,” the report said.

The conference committee met on November 7 to harmonise the differences between the versions passed by both chambers respectively.
The harmonised report was endorsed by Senators Ahmed Makarfi, Barnabas Gemade, Clever Ikisikpo, Andy Uba, Olubunmi  Adetunbi and Abdulkadir  Jajere.

Chairman, House Committee on Finance, Hon. Abdulmumin Jibrin; Chairman House Committee on Appropriation, Hon. John Enoh; Chairman, House Committee on Legislative Budget, Hon. Bamidele Opeyemi; Hon. Badamasiu Abdulrahman; Hon. Uzo Azubike; and Hon. Hassan El-Badawy, also endorsed the report on behalf of the lower chamber.

In a related development, the House of Representatives Committee of Legislative Budget and Research yesterday proposed an amendment to Section 81 of the constitution to compel the president of the country to present his annual budget for a succeeding year on September 30.

The members of the committee agreed unanimously that presenting the budget proposal on this date would force the Federal Government to prepare the Appropriation Bill on time to give the legislative arm ample time to study the document and tinker with it after receiving inputs from the public before passing it into law.

The committee at the end of its strategic meeting in Calabar, Cross River State organised to seek ways for the quick passage of the budget, explained that it had become necessary to set a deadline for the presentation of the nation’s fiscal estimates to the National Assembly on September 30 to avoid delays and begin the new year on clean financial slate.

Meanwhile, the National Assembly Joint Committee on Petroleum Downstream yesterday raised the alarm over the N48 billion excess expenditure incurred by the Nigerian National Petroleum Corporation (NNPC) in its 2012 operations.

The committee while examining the corporation 2013 budget with its top management team however picked holes in the documents presented were vague, adding that there were discrepancy between what the committee earned as income and what was its operational expenditure for the year was.

The Chief Strategist of the corporation, Mr. Timothy  Okon, told the committee that the corporation made a total of N2.36 trillion between January and September, 2012.

He also said that the corporation’s total expenditure for the same period amounted to N2.84 trillion.
According to him, the projected revenue for the period was N4.02 trillion, which brings the performance to 59 per cent, but noted that the full year performance is expected to be N3.23trillion.

Okon explained that the 2012 plan for the three refineries was for the refining of 44million barrels, but only succeeded in refining 23million barrels out of a total annual allocation of 162 million barrels.

He said the 162million barrels projected for 2012 was an aggregate of crude oil allocation to NNPC of 445,000barrels per day, noting that a total of 10.1billion litres was refined out of the total expected 18 billion litres for the same period.

But the committee rejected his presentation, saying that it was a deliberate attempt by the corporation to deceive and confuse Nigerians and the committee.

The committee which is made up of senators and members of the House of Representatives, pointed out that NNPC failed to supply the details of how they arrived at the revenues they made during the period and the details of how they spent what the claimed to have spent.

Senator Ayoola Agboola, while raising observations on the budget, said, “This is not a budget. A budget should contain details of revenues and expenditure.” Chairman of the committee, Senator Magnus Abe, highlighted some of the expectations of the committee, demanding further details of the revenue profile and expenditure made in 2012. 

He said, “We cannot go on to consider the 2013 budget unless we understand how you arrived at the total figures. Tell us what the sources of the revenues are and how the monies were spent.” 

Senator Abe asked, “Your expenditure is more than the revenue your received during the period. Why is that, where did you get the extra money from? The difference in the expenditure and income, where did you get that money from?”

Responding Okon said: “The NNPC is a running business and it has reserves and we got the money from the reserves,” even though he had earlier told the committee that he did not have the details with him. He however argued that the budget document submitted to the committee was not “an audited account of the NNPC. You can wait until we have a full audited account and then know whether there is a budget deficit.”

In his contribution, the Group Executive Director, Refining and Petrochemicals, Mr. Philip Chukwu, made efforts to explain the source of the extra money that made up the corporation’s total expenditure, when he said the NNPC used some of the proceeds from its activities to fund other operational financial demands during the period.

He said, “There are proceeds from NNPC’s oil production activities. It also funds the work in the refineries from the profits coming from the revenue streams. That is why we have the higher operational expenses.”
The committee faulted Chukwu’s position, saying that it contracted an earlier statement where he described NNPC “Reserves” as crude oil and not in cash.

Abe, while concluding proceedings, noted that it was clear that the presentation of the corporation would not lead to any transparent consideration of the budget.

He noted that the National Assembly had the powers by virtue of Section 162 of the Constitution, to appropriate funds for the NNPC.