OIL BENCHMARK PRICE OF $78 FOR 2015 BUDGET IS UNREALISTIC- SENATOR BUKOLA SARAKI

These are troubling times for the Nigerian economy. Our revenue base is caving in under the stress of falling price of oil in the international market. Due to the drastic and persistent nature of this fall from the highs of $115 in June of this year, it is my considered view that we can’t continue to give the impression that it is business as usual. The fact that the free fall in the international oil market price has seen it loosing over 25% of early June highs means that correspondingly our economy has lost over 25% of budget revenue estimates of the period as a result. More ominously, the fact that it continues to fall unabated means that it is not getting better yet and therefore we must now apply the breaks and act fast before they get out of hand.

 

Our economy cannot fully withstand the current trend of the current oil market. It is not our fault that the market is volatile but is will be our fault if we don’t learn from the mistakes of previous price falls especially 2008 to plan timeously on how to ease the pain for our people. This is not the time to paint over the rust, discussions and the choices we make now must be based on economics not politics.

 

The current position to put the benchmark for oil price at $78 is inconsistent with the economic trend and attitude of the managers of our economy, which has shown in the past to be very wary of over optimistic benchmark assumptions settling rather for the more prudent conservative base.

 

 

 

YEAR

PROPOSED OIL BENCHMARK PRICE

AV. OIL PRICE PER BARREL

2011

$75

$100

2012

$70

$111.67

2013

$75

$107.96

2014

$74

$90

2015

$78

$79

 

The above table clearly shows a clear departure from the trend over the years to a very acute tendency in 2015 proposed budget MTEF paper. This MOF/Executive position is hard to justify on any economic modeling or recent policy positions. One is left with the impression that this benchmark is not a product of any economic model but a political induced decision that does not paint the correct picture nor aligns itself to the 2015 forecast. So government should go back and come up with a realistic benchmark, which in my view cannot be above the lower 70’s. There is no better time to give full disclosure of the state of the economy and tell the Nigerian people the truth. We have a problem in our hands but not one that cannot be surmounted with the right political will. 

 

WHY THE URGENT NEED FOR ACTION

Aside the issue of the benchmark, the country needs a contingency plan in place now.

 

There is no country leadership that can continue to act like business as usual where it faces over 25% drop in its annual revenues.

 

Our foreign reserves have depleted considerably from the heights it had achieved of over $58b to the $39bn we have now. What this means is that we have small room to maneuver than we had in 2008.

Since most of this cost will be borne by the capital side of expenditure there is a likelihood that the implication will be in job losses, unemployment, social imbalance etc. none of the impact will be positive.

 

The implication of the state of our financial affairs and the reality if the truth is to be told by government is that there will be little or no capital project to be implemented in 2015 except things change drastically. But before Nigerians are called upon to make sacrifices government must show the will to tackle the monumental revenue leakages in our finances. These leakages have the capacity to significantly reduce the level of impact from this economic situation. It is unacceptable for these leakages to continue whilst Nigerians are called to make sacrifice.

 

These leakages, which are known to all but have persisted, now need to be tackled urgently.

 

1.   Crude oil theft.

The continuous loss of over 200,000- 300,000 barrels per day of crude must be stopped. Whether the perpetrators are powerful or highly connected is no longer an acceptable excuse why government with the full capacity of the law and instrument of state cohesion hasn’t been able to fully address this menace.

 

2.    The other issue is the vexed issue of the Kerosene Subsidy, which is costing the economy over N300b annually. This issue, which must be disconnected with the fuel subsidy, is one that government can easily deal with. There is incontrovertible evidence that the scheme feeds only the pocket of those who import Kerosene and does not get to the ordinary citizen. At this stage of our fiscal situation, this presents a good opportunity to exit the scheme to fund other critical sectors that can augment the revenue base.

 

3.        Another area that the government could work to review would be the Crude SWAP program. Many reports including the NEITI report have indicted this NNPC program and called for a review of the program, as it is not adding value to the economy. There is no better time to stop the program. It’s wasteful and inefficient.

 

4.        Government will have to revisit its recent decision to grant some oil companies Pioneer Status. This has become necessary as the nation can ill afford this due to the fiscal implications on the revenues of the country especially collectible tax in the face of these new realities.

 

What is required now is the right political will and leadership from government. Government should as a matter of national importance convene a meeting of the National Economic Council to proffer a collective and workable decision on the national contingency and viable benchmark oil price. There is no better time than now for government to do what is right and save Nigerians from the foreseeable hardship ahead.

SENATOR BUKOLA SARAKI is Chairman Senate Committee on Environment and member Senate Committee on Finance

SENATE ACTIVITIES FOR TUESDAY 14TH OCTOBER, 2014

Yesterday, Tuesday-14th October 2014, the Senate took the 1st Reading of the following bills:
i. Equipment Leasing Bill 2014 (SB. 514) Sponsor- Sen.Ita Enang.
ii. Nigerian Geological Survey Agency Act 2003 (amendment) Bill 2014 (SB. 515) Sponsor – Sen. Danjuma Goje.
iii. N.D.E Act 2011 (amendment) Bill 2014 (SB. 516) Sponsor- Sen.Danjuma Goje.

The Senate received as laid before it, the report of the Conference Committee on the Review of the 1999 Constitution of the Federal Republic of Nigeria (further amendment). The Audit report of the Nigeria Extractive Industries Transparency Initiative on the Fiscal Allocation and Statutory Disbursement 2007-2011 and the Solid Minerals 2011 was also laid before the Senate.

The Conference committee Report on the National Health Bill was thereafter considered and adopted by the Senate.

The Senate also commenced the consideration for 2nd reading of the Insurance Brokers Act 2003 (Repeal and Re-enactment) Bill 2014, but stood it down for further legislative action.

Finally, the Senate sitting in the Committee of the Whole took the clause by clause consideration of the Committee Report of the Federal University of Petroleum Resources Effurum (est) Bill 2014. The Bill was subsequently read the 3rd time and passed.

Senate Activities for Tuesday May 27th, 2014.

Today, the Senate in plenary received as laid before it, the report of the Committee on Interior, in respect of a motion on “the Tragic Nationwide Aptitude Test and Physical Examination on 15th March 2014 into the Nigerian Immigration Service. The Senate also celebrated and congratulated the Nigerian Children as they mark their Children’s day today.
The request of Mr President was received, for the confirmation of Mr Stanley Lawson and Prof. Dahiru Hassan Balami for appointment as a Non-Executive Member and Monetary Policy Committee member of the Central Bank of Nigeria respectively. Both nominations were referred to the Committee on Banking to return in 2 weeks.
Also, the Senate sat in the committee of the whole and considered the report of the Committee on Judiciary, Human Rights and Legal Matters on the screening of Prof. Jummai A.M Audi for appointment as a Commissioner of the Nigerian Law Reform Commission and confirmed the appointment as recommended.
The consideration of the committee report on the Nigerian Financial Intelligence Centre Bill was commenced by the Senate today and subsequently stood down. Some Senators (Sen. Ita Enang and Magnus Abe) argued strongly against the Bill which they stated is a duplication of the EFCC and Money Laundering Act respectively. Other Senators spoke in favor of the Bill citing international clamour for such agency and the unabating wave of corruption as reasons for the need for such a specialized agency. The Senate was able to take only clause 1 of the Bill  and further consideration of the Report stood down to another legislative date.
Other items on the Order paper were stood down to another legislative date

Senate Activities for Thursday 10th April, 2014

Today at plenary, the Senate took the 1st Reading of the following Bills:

  1.  Nigerian Institute of Transport Technology Act 2011 (Repeal and Re-enactment) Bill 2014 (SB.472). Sponsor – Sen. Sahabi Ya’u.
  2. Nigerian Council for Clinical Psychologists (Est. etc) Bill 2014 (SB.473). Sponsor – Sen. Margery Chuba-Okadigbo.

 

The Senate in the Committee of the Whole considered the report of the Committee on National Planning, Economic Affairs and Poverty Alleviation on the screening of the nominees – Mr. Emmanuel Olusanya Omirin (Osun State) and Shettima Umar Gana (Borno State) for appointment as Members of the Revenue Mobilization Allocation and Fiscal Commission. The recommendations therein were approved and the nominees confirmed.

 

The Report of the Committee on Health on the HIV and AIDS Anti-Discrimination Bill 2014 (SB.258) was also considered by the Senate. The Bill was subsequently read for the 3rd time and passed.

 

The Senate further adjourned to Tuesday, the 29th of April 2014.

Senator Saraki’s views on 2014 budget

2014 Appropriation Act passed today:  Read below for Senators Saraki’s view.

Today at the plenary, the Senate considered and passed the 2014 Appropriation Act. During my contribution on the floor of the Senate on the consideration of the report, I drew the attention of the Senate to a lacuna in the budget, which I considered critical to the effective implementation of the budget. My intervention is simple. The Appropriation Act we passed today did not consider a valuable indicator of our revenue base- oil production variation. In other words, our national budget is predicated on oil production and price. So much emphasis has however been placed on the bench marked price but little consideration on the production side. In recent times, we have witnessed massive fluctuations in the production level with production going down sharply and other times going up. We have seen production fluctuate from 2.1mbpd to 2.5mbpd and back to 1.8mbpd to 1.9mbpd all within two years. We have budgeted for on a baseline production figure of 2.5mbpd and ended up with 2.1mbpd average. All of these have impacted on the implementation of the budget significantly. This throws up a lacuna in the budget implementation process which now raises few questions. Some of which are; What then happens if there is a significant drop in production?  What happens if there is a significant improvement in the production levels?  While we may have set a benchmark on oil price (helpful as it may be), we have not set clear parameters on what happens with production fluctuations a key determinant of revenues. We cannot deal with one and not the other if we want a level of certainty and predictability in our budget. Implementation outcome is a key factor and a stepping stone to the next level

NATIONAL ASSEMBLY READ NEW BILLS

The following Bills were read for the 1st time:
i. Mutual Assistance in Criminal Matters Bill 2014 (SB.470). Sponsor – Sen. Victor Ndoma-Egba.
ii. Proceeds of Crime Bill 2014 (SB. 471). Sponsor – Sen. Victor Ndoma-Egba.
The Senate, sitting in the Committee of the Whole resumed the clause by clause consideration of the Establishment & Public Service Committee Report on the Pension Reform Act (Repeal and Re-enactment) Bill 2014. The consideration of the report was concluded and the Bill was read the 3rd time and passed.
Other items on the Order paper were adjourned to another legislative date

Senate activity for Wednesday 19th March, 2014

At the Senate plenary session yesterday- Wednesday the 19th of March 2014, the entire session was dedicated to the clause by clause consideration of the both bill which scaled their 3rd reading and passage by the Senate.
The Senate sitting in the Committee of the Whole, considered and debated clause by clause the consideration of the Committee Report of these two Bills – The National Assembly Service Commission Act (Repeal and Re-enactment) Bill 2013 and the Trafficking in Persons (Prohibition) Bill.
Both Bills were subsequently read for the 2nd time and passed by the Senate.
Other items on the Order paper were stood down to another legislative date.

Senate Activity for Tuesday, 11th March 2014

The Senate resumed plenary sitting on Tuesday-11th of March 2014 after its centenary break. The following Bills went through their first reading on the floor of the Senate-

i.    National Fiscal Stabilization Bill 2014 (SB.457). Sponsor – Sen. Ehigie E. Uzamere
ii.   National Biodiversity Bill 2014 (SB.458). Sponsor – Sen. Ehigie E. Uzamere.
iii.  Agricultural Processing Zones (Est.etc) Bill 2014 (SB.459). Sponsor – Sen. Sefiu A. Kaka
The clause by clause consideration of the Judiciary Committee Report on the Trafficking in Persons (Prohibition) Act 2003 (SB.264) was commenced and stood down at the 6th clause. This was to enable the Senate adjourn for its various Committees to work on the 2014 Appropriations for their respective ministries
/MDAs.
The Senate then adjourned to the 18th of March 2014 at 10am prompt.

Bukola Saraki led committee to probe Ministry of Environment contract allegedly executed in Boko Haram enclave

The Senate Committee on the Environment and Ecology, on Monday, queried the Federal Ministry of Environment for paying N21m to a contractor who claimed that his firm was currently executing a construction project in the Bama community of Borno State.

It therefore directed the leadership of the ministry to institute a probe into the issue and forward their findings to it before the 2014 budget they submitted would be approved.

Permanent Secretary of the ministry,  Mr. Taiye Haruna, had listed the Bama road construction which also included drainage work and erosion control as one of the 20 other constituency/intervention projects at different stages of execution and on which N1.4bn had been paid.

He stated this when he represented his Minister, Mrs. Lawrencia Labaran-Mallam, when the senate committee led by the Chairman,  Senator Bukola Saraki,  went to the ministry headquarters in Abuja on oversight functions.

Haruna had drawn the anger of members of the committee when he claimed that his ministry had effectively implemented all the 20 constituency/intervention projects under its supervision and reeled out the details.

A member of the committee, Senator Boluwaji Kunlere, immediately drew the attention of the Permanent Secretary to the fact that there was no way any contractor could execute any project in Bama between July 2013 and now when the area had been fully occupied by the Boko Haram insurgents.

Kunlere, who is also a member of the Senate Committee on Security and Intelligence, alleged that  the claims of the contractors were fraudulent because it was difficult for his team led by heavily armed military personnel, to gain access to the area when they went there on oversight functions within the same period.

The Permanent Secretary referred the issue to a director in charge of the project who justified the N21m paid to the contractors when he said that convincing evidences including documents and pictures were presented to him.

Haruna however told the committee that the N1.4bn appropriated to the ministry for constituency projects had been fully disbursed to the various contractors that handled them.

He said his ministry generated N267m as Internal Generated Revenue last year, explained that given an enabling environment to operate, it could generate over N1bn as IGR.

The committee members however expressed dissatisfaction over the presentation of Haruna and threatened to recommend zero allocation to the ministry if its officials failed to convince them that money appropriated were being effectively utilised.

Vice Chairman of the committee, Senator Ben Ayade,  also faulted the payment of N100m to the various consultancy firms hired by the ministry to carry out studies on its N3.7bn Great Green Wall project aimed at controlling desertification in some areas of the country.

He said rather than spending the whooping sum to buy information which was always available online, the ministry should have spent to execute physical projects like tree planting among others to check desert encroachment.

Rounding off his committee’s observation,  Saraki said, “The documents presented to us by the Permanent Secretary as completed projects was different from the reality on ground at the various project sites.

“That further showed why it had taken you so long to reply our letters. This is given us serious concern and obviously, there is crisis, there is the issue of competency,  commitment and seriousness. It has to change.”

He observed that notwithstanding the fact that the ministry’s capital project was reduced from N12bn in 2012, to N9bn last year and  further reduced to N6bn in 2014, the amount involved was still much.

He noted that Nigerians were aware that projects in their constituencies were not being executed and they know that money are being released.

He said, “I am not ready to put my name and signature in such document again this year except there is a change. This shows that it is either that we were deceiving them or there is a problem of fraudulent malpractice going on.

“I think this ministry really needs to address all these issues. It is getting to that stage. We have gone through a number of projects today and its the same story.

“There is a case of Borno state where any Nigerian would tell you that there is no access to the place,  how then can a contractor now tell us that he is working there and deserve to be paid N21m?

“The Director in charge of the project said he stands by the payment and I hope that the ministry would investigate this case and make it as an example. It would be a miracle that in a place where the military cannot enter, a contractor has the capacity to go and work there.

“That shows the problem we have been having with the ministry of the environment.  Honestly,  it is the right time we address these issues. I would not want to sign anything again that I know that the mechanism has not been put in place, to ensure that the money would be used for what it was designed for.

“The ministry need to sit down and look at the mechanism otherwise,  we will just turn this ministry to corruption incorporated when contractors will just believe that they can come here, do a project that they know nobody knows what is going on there and put up a certificate which he knows would be signed and collect his money. As a senate committee,  we have been patient enough.”

Saraki asked the ministry to design an institutional method that would ensure that when a project is 90 percent completed on paper, it will be so on site.

 

‎Senators present were Senator Bukola Saraki, Senator Ben Ayade, Senator Aidoko, Senator Kunlere and Senator Gbenga Ashafa

 

 

Bamikole Omisore

SA Media to Senator Abubakar Bukola Saraki

 

The Lead Debate On The Motion For Transparency And Accountability In Fuel Subsidy Management By Senator Bukola Saraki

The fuel subsidy scheme is a program designed to make petroleum products more accessible affordable and cushion the effect of market prices on the poor masses.

This policy has been long standing. This motion does not seek to abolish the policy, (that’s a debate for another day). But for now, we are concerned to make the scheme more effective, transparent, efficient, corrupt free and work within the Appropriation, Fiscal Responsibility laws and in the interest of the masses for which it was set up. It is not set up to work for a few.

We all recognize that the country may not afford to discard the policy until it has put the necessary measures in place to cushion the effect. However, it is irresponsible and not an excuse for us to implement the policy in a manner that endanger the economy at large and thereby impoverish the same people we care about.

Those charged with administering this all-important task must operate within the tenets of the law, within recognized, accepted global governance parameters especially with respect to the authority of the National Assembly.

I will think it’s important we remind ourselves of our constitutional responsibility which by Section 80 (4) mandates that “No moneys shall be withdrawn from the Consolidated Revenue Fund or any other public fund of the Federation, except in the manner prescribed by the National Assembly.”

The matter before us goes to the root of our mandate- the reason for our being here, to protect the interest of our people and to ensure that their scarce resources are utilized efficiently.

Presently, Now how can a single item expense line budgeted for 240b increase to N1.5 trillion? Over N1.3 trillion above budget. How can we fund that? Without having a deficit of greater than 6% Or depleting funds that should have gone into Power /Roads Then where is hope for 2011 budget.
So all of us pledged to work for FGN to see this transformation of our Country must defend and shout, this is anti people. To keep quiet will amount to abetting this inefficiency.

How else do we explain that in one accounting year we are spending N1.2 trillion on petroleum subsidy, which is 14 times the value of Capital budget for Power sector in 2011, Or 14 X power capital (87B) Or 9 X Roads (135B) Or 24 X Health capital or 5 X entire – maternal Or 24 X education capital or 4 X entire Or more alarming 4 X Defence / Security budget (445B)

Those who are charged with revenues of this country must be called to account for every monies they received on behalf of the country.

How else do we explain that the Appropriation Act makes provision for N240bn, meanwhile, the agency is spending 1.2trillion without recourse to the National assembly? The deficit by this trend will be about N1trillion, which is the equivalence of the entire Capital Budget for the year. This impinges on the integrity of NASS. The 2011 appropriation Act clearly states how much is budged for Fuel subsidy. But to have a 20%, 30%, 40% variance can be argued but 700% is  a slap

There will be those who will argue that the entire increase is due to the volatility and increases in the international market prices of petroleum product. If you look at monthly figure crude oil price /subsidy

March $114       N72b
April   $123        N105b
July    $116         N186b
Aug    $110          N185b

so where is the correlation?

This is merely a smoke screen and hardly the complete truth. Information made available to us confirm that it cannot all be attributable to international oil price movements but due to factors such as; wastefulness, misallocation, misappropriation, non-inspection and other forms of malpractices in the entire process.

To support this the price of oil when the budget was approved and amended has not changed significantly as crude oil hovered around $80 – $110 per barrel. For example if we take one of the products like kerosene that was never under NNPC but PPPRA which was set up to oversee the implementation of the federal government program relating to oil prices with adequate accountability safeguards. Now this product primarily account for a huge part of the subsidy bill even though the masses for which it was envisaged cant find it to buy because it has been cornered by those in aviation for aviation fuel.

This is the situation we are dealing with where there are no inspections rather products sold at market prices in rural and inspected areas turn around and place bills on the subsidy scheme.

To buttress my point, and I am not someone that believes everything I read in papers. Permit me to quote ‘’ That importers routinely falsify bills of lading, inflate the amount of fuel imported five-fold , then collect the government subsidy on all of it, and finally smuggle the fuel to a neighbouring Country to sell it for double or triple the price.

This statement is strong from an International magazine, figure too huge to ignore, at worse let’s satisfy our conscience that they are baseless allegations. This is why its key we get to the bottom of it, is because without knowing the real need of our Country re-subsidy you can’t reach a conclusion to remove – i.e why the debate on removal can only be done when we have true picture.

Or how else can we spend this amount where a single line expenditure is greater than entire budget.

Mr. President when you inaugurated Finance Committee, in your speech you stated as key the issue of all revenue being captured. This is an example of an agency – just dipping his hand on government coffers why NNPC is behaving like Government within Government Surely if not access to the funds – They will have come for amendment to appropriation/ virement  e.t.c

When   I first presented my motion on the 13th of September 2011 the challenge then was only 2011 Budget implementation Now just on Friday, CBN Governor alerted the nation that the scheme  was now endangering our Naira.

Why? Because these importers are now abusing the fx market.

CBN has now banned them from the market – this is a serious indictment.

What are they doing? Pure economic sabotage – something needs to be done urgently.

We must show that this 7th Senate is about the people, men and women, who care about the people, with honour and integrity, last hope for common man and women.

We must put an end to this corruption practice where an agency without budgeting spends extra budgets without approval of the National Assembly. It amounts to economic sabotage by a few people that now threatens the implementation of entire Country budget. This makes nonsense of the entire budget process and the integrity of this chamber. It portrays a bad image for the Country and makes palliative progress for the poor impossible to implement or sustain.

As I said this is not a day for the issue of whether or not fuel subsidy should be removed or sustained but without addressing this issue we cannot sustain subsidy. We must be sensible to our people, and get to show why this scheme is failing? who was responsible? Without this we can’t conclude.

Senator Abubakar Bukola Saraki