LAST week, Major General Muhammadu Buhari (Retired) wrote to the National Assembly asking that the Medium Term Expenditure Framework and, by extension, the 2022 Federal Budget be amended to reflect a certain number of adjustments. Given the nature of National Assembly approval in tax matters, this request is considered as good as approved by NASS. This speech reviews the demands and posits that fiscal governance in an economy largely dependent on petrodollars can be managed in a more prudent and sustainable manner.

The existing 2022-2024 MTEF is benchmarked at $62 per barrel of crude oil. The new demand is a benchmark of $73 a barrel. This is based on the increase in the price of crude oil resulting from the Russian-Ukrainian war. At first glance, this request for an increase in the reference seems reasonable. But the poser is: how long will this war last? If the war ends in one to three months, will the new price be realistic and do we expect crude oil prices to continue to rise after the war? Will the president come back for an amendment to the MTEF to reduce the benchmark price if the price of crude oil falls below $72 a barrel? They are unanswerable posers who should have played on the minds of budget managers before proposing these changes for NASS approval. Ideally, the money made from a higher crude oil price, being a price above the benchmark price, is supposed to be saved in the surplus crude account and later appropriated after being distributed among the three levels of government.

The second request is for a production volume reduction of 283,000 barrels per day. This means that daily production will be 1.6 million bpd instead of the 1.83 million bpd approved in the existing MTEF and budget. The president based this reduction proposal on the activities of vandals. For several years and under President Buhari, Nigeria has not produced enough to meet its Organization of Petroleum Exporting Countries quota. Other OPEC countries have in the past exceeded their quotas and indeed have spare production capacity to produce beyond the quotas. The premise on which the president is making the request to cut production is ridiculous. It’s not just about vandals; a vandal is defined as a person who deliberately destroys or damages property belonging to others. It’s not about destruction and damage. It’s not even a few petty criminals stealing crude oil from jerry cans and jars. These are thefts on an industrial scale, organized oil thefts, directly carried out under the supervision of a ministry under the supervision of the President. Nigeria in some past years had budgeted for real-time monitoring of oil pipelines explaining that it was to introduce technology, facilities and services to monitor oil pipelines 24 hours a day. happened to these budgeted funds?

In earlier times, the regime blamed what it called underinvestment in the sector by previous governments for failure to meet the OPEC quota. This blame game comes after seven years in power. Today it’s oil theft, yesterday it was underinvestment. Tomorrow, another excuse will come. How long will a regime continue to waver, lacking ideas and imagination of good governance and persisting in inflicting its incompetence and neglect of duty on over 200 million Nigerians? Buhari’s regime’s favorite story of previous administrations selling crude oil for more than $100 has suddenly gone out of fashion given the current price of crude oil. Thus, the regime has crippled Nigeria and rendered it unable to take advantage of geopolitical developments in the oil sector. Thus, we are made to believe that we are producing less when we should have increased production.

Then the big elephant in the bedroom. According to the President, 442.72 billion naira was earmarked for fuel subsidy in the 2022 budget for the period January to June. Due to the rising price of crude oil, Nigeria is paying more for the PMS subsidy. It is therefore asking for an additional subsidy of 3,557 billion naira. How the president arrived at the trillion naira is not stated in the letter to NASS and is not available in the public domain. But fundamental analysis is imperative. If oil had continued to sell at the old prices, according to the president’s calculations, we would have needed 442.72 billion naira multiplied by two. This would equate to the sum of N885.44 billion. If this calculation is correct and the price of crude oil has doubled in the international oil market, it implies that Nigeria will need 885.44 billion naira multiplied by two to pay the subsidy. This would be the sum of 1,770 billion naira. The call for a vote on the N4 trillion fuel subsidies is not only outrageous, but unsupported by empirical evidence. It lacks credibility and appears to be an attempt to create a slush fund for political campaign spending.

Nigerians are aware and it has been confirmed by the State Petroleum Resources Minister and other senior government officials that the 65 million liters per day on which the subsidy is calculated is not based on empirical evidence. It is impossible that fuel consumption will have risen from 35 million liters per day in 2015 to 65 million liters per day in 2022 after two recessions, high inflation and the worst unemployment figures since independence. This quantum of PMS is sufficient to supply all of West Africa.

This is not the way to manage a depressed economy where all macroeconomic fundamentals are adrift, shaken by unsustainable debt (debt servicing over 95% of undistributed income), etc. The tragedy is that the regime has failed to position Nigeria to take advantage of high oil prices, to meet our OPEC quota and even exceed it given our poor finances. Although we cannot meet our OPEC quota, we continue to borrow even to pay salaries and overheads. Yet the same administration presides over inflation of consumption figures for oil subsidy applications.

The National Assembly is therefore called upon to insist that we produce enough crude oil to meet our OPEC quota as well as to hold accountable the ministers presiding over the oil industry. NASS should request evidence of the actual amount of PMS consumed in Nigeria each day. The figures presented by the President have no empirical value and must be rejected. Nigerians cannot consume more than 35 million PMS every day.

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