From Kola Ologbondiyan and Ahamefula Ogbu in Abuja, 12.15.2004
President Olusegun Oba-sanjo has asked both the Senate and the House of Representatives to maintain the benchmark for the 2005 budget at $27 as stipulated in the appropriation bill he presented to them. The president's position is against the backdrop of moves by the joint National Assembly Com-mittees on Appropriation and Finance to hike the benchmark to between $30 and $35. Obasanjo made the request in a letter, which was read on the floors of both houses by the Senate President, Chief Adolphus Wabara, and the House Deputy Speaker, Austin Opara. The letter was dated December 9, 2004 and entitled "The 2005 Budget." According to Obasanjo, "the oil price assumed for the revenue framework remains US$27 per barrel and the level of deficit is still 2.9 per cent of nominal GDP. "I have noticed the following arguments for and against raising oil price assumed for the 2005 Budget. The principal arguments for an increase are the possibility of: continued expansion of the Chinese economy; strict compliance by OPEC countries to their production quotas; continued insecurity and violence in Iraq; unanticipated conflict in any oil producing region; a relatively weak US dollar compared to other major currencies in the world. "The principal arguments against an increase are the likelihood that: Iraq will be at peace and will be able to produce about 3mbpd of crude oil; additional crude oil will be produced by Russia; there will be a mild winter in the Northern hemisphere; OPEC and non-OPEC countries will over-produce. "On balance, I have elected to retain the oil price of US$27 per barrel and strongly urge that we stay at this price because the oil market remains very volatile as evidenced by the six dollar drop in price last week during less than 24 hours of trading. It is our assessment that there is an important fiscal risk that would be attributable to raising the price above the level. "I plan to finance the deficit of N319 billion by drawing N148 billion (50 per cent) out of the oil revenue saved in 2004 and the balance of N171 billion will be financed from the proceeds of asset sales and concessioning of the ports. "Although our privatization efforts have not yielded much in the recent past, there is a clear timetable for the completion of the sale of Alscon and Nitel in the first and second quarters respectively and the revenue projections are prudent. My Minister of Finance is also overseeing the concessioning of the ports. "I, therefore, believe that the projected revenue is prudent and achievable and I will personally monitor the progress of the privatization to ensure we achieve results," Obasanjo stated. Budget 2004 was passed using $25 per barrel of crude oil as benchmark. During the ending year total collectible revenue for the entire federation was projected at N3.02 trillion. The Federal Government projected revenue was N1.12 trillion made up of 73 per cent from oil revenues, eight per cent from Customs and Excise while the balance is from other taxes. Against these projected revenues, Budget 2004 also had a projected expenditure of N1.3 trillion with a projected fiscal deficit of N181 billion.
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