President Goodluck Jonathan on Tuesday asked the parliament to reduce the benchmark oil price of 67 dollars on which the 2010 budget was based, because of falling oil prices in the world market.
In April, Jonathan signed into law a 4.6 trillion naira (31-billion-dollar) budget for the oil-rich west African country, but he indicated in a letter to both houses of parliament that spending would have to be cut.
“Given the recent drop in international oil prices from over 80 dollars per barrel to under 70 dollars per barrel, it is prudent to reverse the oil benchmark price to a more realistic level,” the Nigerian leader said in his letter, without suggesting a new benchmark.
“On the expenditure side, it is necessary to reverse downwards the aggregate level of expenditure from the 4.6 trillion naira approved in the 2010 act and adjust the budget details accordingly,” he added.
Jonathan said the requests were necessitated by “certain challenges posed by the serious shortfall in projected revenue and the adverse implications this poses for financing the level of aggregate expenditure appropriated by the National Assembly.”
He said the shortfalls in both oil and non-oil revenue might continue for the rest of the fiscal year with adverse implications for the financing of the budget.
Jonathan also asked the National Assembly to approve a supplementary budget “to cater for certain unanticipated items of expenditure”, including a planned pay rise for civil servants as well as the celebration of the 50th independence anniversary of the country on October 1.
Nigeria, Africa’s most populous country and the world’s eighth biggest oil exporter, currently produces a little over two million barrels a day and depends on the sector for more than 90 percent of its foreign exchange earnings.