Nigeria loses N1trn annually to crude production cost — Rep

…As House moves to reduce $38 oil benchmark

ABUJA—CHAIRMAN, House of Representatives Committee on Appropriation, Abdulmumin Jibrin, said yesterday that Nigeria was losing an average of N1 trillion annually as production cost in crude oil exploration.

Jibrin, who disclosed this to journalists while fielding questions on the 2016 budget that had passed through second reading in the House, said that as a result of the dwindling international market price of oil, the House would consider a reduction of the benchmark, which was pegged at $38 per barrel at the time the budget proposal was prepared.

He noted that with the current price of about $30 per barrel, there was the need to review the benchmark to meet up with the current realities.

Yakubu-Dogara
He said: “One very important aspect that swallows a large chunk of the money in the budget is the cash call and production costs. Many people take their eyes away from production costs.

“But it is critical, this is because every year we pay an average of one trillion naira as cost of production. So, it is important that this time around, we need to sit with relevant authorities in the oil and gas sector to see the details of this production cost, to ensure   the country is not just being shortchanged.

“We are just mopping a lot of money from the first line charge just to give to our foreign partners.

“The benchmark has been pegged at $38 dollars and of course we have known that the oil price has gone much below that figure. I am sure that during this budgeting period we will engage again with the Committee on Finance and relevant committees and we should be able to peg the benchmark at a very safe figure that should be more realistic.

“Of course, the benchmark is one of our concerns and the revenue aspect of the budget. Once you have raised the issue of benchmark which we are going to work on to see that we peg it in what looks more practicable, then of course, there is the aspect of the non oil.

“The non oil of course the projection looks realistic but if you go by history, we must also be extremely disciplined to ensure that the projections are met month after month. So, we are not unmindful of that.”

Commenting on exchange rate, he said:  “On the aspect of the exchange rate, exchange rate is an exclusivity of the Central Bank of Nigeria but of course we do engage them. The CBN usually comes up with justifications for pegging the exchange rates.

“Central Bank is an autonomous body, it is independent, so, we don’t tamper with that. But again within this period, we will still engage the Central Bank so that we can be able to discuss with them, if there is any possibility of any adjustment.

“Otherwise, in terms of exchange rate, we leave it as central bank recommends to the National Assembly. And very quickly also, there is the aspect of the budget of deficit financing, we are also concerned about that, in the next few days, we will be also going to engage the executive particularly, the minster of Finance and   the minster of Budget and Planning, so that we can really be sure how the deficit is going to be financed.”

He also said there was the need to reduce domestic borrowing and increase external borrowing in implementing the budget.

He said:  “Generally the position of the National Assembly is   that we need to reduce domestic borrowing significantly, we expect that a chunk of the borrowing should come from external sources.

“Already, the economy is struggling and when you now put so much weight on the local economy in terms of drawing more money from the local economy, it is going to do a lot of harm to the economic system of the country.”