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2021 Budget: Stakeholders, Experts React to FG’s Oil Production Benchmark

-By Gideon Osaka

Reactions have continued to trail the oil production benchmark pegged by the federal government in the 2021 budget.

A total of 1.87 million barrels per day has been projected for oil projections in the 2021 budget presented by President Muhammadu Buhari to the joint session of the National Assembly.

This is despite huge oil supply cuts by the Organization of Petroleum Exporting Countries as well as the cut in demand for the product across the globe.

Subsequently, stakeholders and experts have aired their views on the benchmark which they say reflects the fact that Nigeria has not shown any sign of diverting from oil earnings as it’s major source of revenue.

The Organised Private Sector (OPS) of the Nigerian economy were the first to tell the federal government not to rely much on oil revenue for the effective implementation of the proposed 2021 budget.

They also urged the federal government to use the budget to align the budget with the Economic Sustainability Plan (ESP), which was unveiled and designed as the first line of defence to mitigate the effects of the COVID-19 pandemic.

Ambassador Ayo Olukanni

Similarly, the Director-General of the Nigerian Association of Chambers of Commerce, Industry, Mines and Agriculture (NACCIMA), Ambassador Ayo Olukanni, has raised the alarm that revenue would be one of the biggest challenges in implementing the 2021budget and advised the federal government to truly diversify the economy by paying more attention to sectors like the creative industry, agriculture, and mining and their entire value chain.

Olukanni said: “We see this budget as a continuum of the ESP, which was designed to tackle issues such as improving agricultural production, food security, provision of jobs and social safety net for the most vulnerable segment of society.”
Also, the Director-General of Nigeria Employers’ Consultative Association (NECA), Mr. Timothy Olawale, also called on the government to block the leakages that still permeate the system in order to promote accountability.

He doubts the feasibility of the 1.8 million barrels per day projections in the 2021 budget proposal adding that “a more strategic need is to reduce the dependence on revenues from oil and strategised ways and means in stimulating the non-oil economy to provide the needed revenue for funding of the budget.”

Speaking in the same vein, the Director-General of the Lagos Chamber of Commerce and Industry (LCCI), Dr. Muda Yusuf, noted that “revenue is very key and very central to the budget. If you look at the last three years there has been large variances, large negative finances in the revenue targets and it is not likely that what we will have in the 2021 budget will significantly be different.

“So, the revenue will continue to be an issue if we continue to have the economy the way it is and for as long as the private sector continues to struggle with all the challenges in the business environment,” he said.

He said: “By the end of year 2020, the debt profile of the country would have reached N35 trillion. Adding the N5.19 trillion anticipated in 2021, and we believe there would still be addition borrowings, which could suggest that the country could reach a N45 trillion debt mark by end of 2021.
“It is also interesting to note, that the value of the debt service in the 2021 budget is equivalent to 87.1 per cent of capital expenditure.

Meanwhile, in another development, David Malpass, the president of the World Bank Group, says there are substantial benefits to the federal government’s decision to remove fuel subsidy.

Addressing journalists during the ongoing virtual 2020 annual meetings of the International Monetary Fund (IMF) and World Bank, Malpass said the progress made so far is valuable.

“I compliment Nigeria for tackling the problem of subsidies in the hydrocarbon area,” he said.

“By reducing those subsidies and allowing gasoline prices to rise – it is very hard for governments to do that – there are substantial benefits.

“It means that there are fiscal savings, it also means that there are environmental benefits that are large and it allows markets to work better and to allocate resources better.

“So, I think progress is being made in that area and it is valuable.”

Speaking on whether the World Bank saw opportunities or problems in Nigeria regarding unemployment and the impact of the pandemic, Malpass said: “I see many problems. It’s harder to see the opportunities; this is a bad thing that happened to the world and particularly to poor people in the world because there’s not an evident solution.

“For Nigeria, the vital steps are to strengthen the health system and the education system, and we try to work in those areas. Also, the governance system and transparency are vital in order to reduce corruption within the system.”
The World Bank chief said each country would have to think of where it wants to be in a post-COVID world which, according to him, will be very different from the pre-COVID world.

“That means a different way of people interacting, hopefully, better; a greener way of operating; and an emphasis on health care.

“We have extended the emergency health response to include vaccines and distribution of vaccines for COVID, but it also has the benefit of helping the vaccination programmes in other areas and the healthcare outreach in other areas that will be so valuable,”

Nigeria of the years have been heavily dependant on proceeds of oil as it’s major source of revenue.

However, the federal government has reported 60% of revenue drop due to the impact of the Covid-19 pandemic on International crude market.

Already the economy has contracted by 6.10% in the first quarter GDP report by the National Bureau of Statistics with a negative growth expected in the second quarter GDP report which may plunge the country into recession.

Experts say for the country to fully recover from the devastating effects of the Covid-19 pandemic, more emphasis must be laid on diversification rather than over concentration on the oil industry.