Why Opposition Lawmakers Opted for $79 Benchmark …Gbajabiamila

BEVERLY HILLS, CA, November 19, (THEWILL) – The opposition leader in the House of Representatives, Hon. Femi Gbajabiamila,  Monday,  gave reasons why progressive lawmakers compelled the lower chamber to adopt the $79 oil benchmark, which caused President Goodluck Jonathan to postpone  the presentation of the 2014 Appropriation Bill.

It will be recalled that the House of Representatives has maintained that the benchmark should be maintained at last year’s 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.

Gbajabiamiala, in a statement Monday, explained that “The Medium Term Expenditure Framework is a three year rolling plan and not an annual plan or guide to the budget.  It is conceptualised 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: The correction of manifest error and changes in the fiscal indicators, which in the opinion of the President are significant. “

According to him, “The parameters and assumptions for last year’s $79 have not changed with the price of oil maintained at over 100 dollars per barrel. As a matter of fact, the overall oil and non-oil revenue projection was met and surpassed in spite of the crude theft claimed by government.”

He argued that “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 three 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 12 Month Expenditure Framework.  To accept to drop last year’s benchmark by about four or five 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.”

The opposition   leader also stressed: “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 five 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 or 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 five  billion 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.

” The Federal Government and proponents of a lower benchmark have argued amongst other things about the volatility of oil prices. Unfortunately each year, this argument is made and each year the argument is negated as the oil price continues every year to stay above $100.  Let’s assume for the purpose of argument it actually drops. Even in a cascading free fall drop to $85 which is unlikely, we will still be way above our revenue projection of $79.

”Now if in the unlikely event that oil price in an unprecedented fashion falls to a ridiculous all time low of say 60, 65, 70 dollars or whatever figure, we have legislative mechanism and process called amendment Bill which can be used to adjust to the reality of the time.

”Even without an Amendment Bill, there are inherent procedures and clauses in such money Bills like impoundment and virement that can be triggered by such an event. So why then should anyone be such a harbinger of bad news and fear monger to suggest that this nation will collapse should the unthinkable happen and the price of oil drops from say $100 to $60. Surely, if there is a possibility that oil prices could drop so far down, then why fix it at  $76.50 instead of $79. Why not $40 or $50.  If it can drop to $79 what stops it from dropping to below what the senate or federal government is advocating and what happens in such an event?

“Furthermore the argument has been made that the continued crude theft is another reason why the benchmark must be set lower. Now this argument seems to stand logic on its head. It appears on the contrary that having lower production or less oil to sell because of theft is the very reason we must increase our benchmark so as to make up for the loss and meet our revenue projection. Very simple.

“However the Federal Government and Ministry of Finance would have us believe in its fuzzy math and voodoo economics that the theft of crude should mean a lower benchmark.  Many of us have always cringed at the thought of having the poor masses pay for the negligence, complicity or failure of the Federal Government. The same reason why we opposed the removal of subsidy.  Let the Federal Government play its role as provided in the constitution (that the welfare of the citizenry shall be the primary purpose of government) and secure our oil and most priced commodity from theft, instead of letting the masses pay for its ineptitude.

“As a House, we have continued to protest the consistent non-implementation of budgets. Ostensibly, the Federal Government continues to blame its non-implementation of budget (an illegality) on shortfall in revenue.  Therefore by the government’s own inadvertent admission, there is a correlation between the benchmark, which is what is used to finance the budget and budget performance. Common sense therefore dictates that a lower benchmark would mean lower budget performance.  If you can only implement budget 40 percent when the benchmark is at a higher $79, it goes without saying that at $74 or $76.50, we should expect if lucky a 25 percent budget implementation and performance.”

According to Gbajabiamila, “Budget deficit and borrowing is another reason why we insisted on retaining benchmark of $79.  It is trite that once you deliberately lower your benchmark and therefore your revenue, you set yourself up for a budget deficit. It becomes imperative therefore to go to the market to borrow for the purpose of financing the budget.

“When this happens, not only do you commit the country to more debt at a high interest rate, the burden of which is passed on to the future generation we purport to save for through the Sovereign Wealth Fund, we also make it impossible for the real economy to grow as small businesses cannot compete with the Federal government who would invariably mop up available funds for borrowing.”

Saint Mugaga, Abuja