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Jerking up 2018 budget oil benchmark can backfire on sustained drop in price—Experts

Many financial analysts have started picking holes on the increasing of the 2018 oil benchmark from $45 to $51, saying the galloping oil price should not be allowed to deceive government budgetary plans because the indices favouring it do not show signs of lasting for long.

To many of them, the causes of the rising prices are not far from tensions in the Middle East which may be contained within weeks.

According to the former President of Chartered Institute of Bankers of Nigeria (CIBN), Mr Okechukwu Unegbu, increasing the benchmark because of the rally in the global oil market was not needful.

He queried “Why can’t we save the surplus and prepare for the rainy day? We can’t just be consuming and consuming,” the surplus should be used to finance critical infrastructure since the country was faced with acute infrastructure deficit.

Also speaking, Prof. Sheriffdeen Tella, Professor of Economics, Olabisi Onabanjo University Ago-Iwoye, Ogun, said the passage of the budget was very late and had created problems in the economy.

He noted that the first job of the budget is to wake up the economy from slumber, as the private and public sectors, including the external sector would become more active.

While stressing that the capital market reacted positively to the announcement of the passage of the budget, Tella averred that the market activities would be further boosted when the budget was accented to by the President.

He said “Although it will take some time for the implication to be fully felt in both the money and capital markets, the very short term reactions starts now and the capital market normally reacts very fast if it is an active one”.

Another expert, Dr. Ken Igboanugo observed that “Taking the benchmark up to over $50 is a planning mistake as the oil price even though is currently rising, may fall any time the temporary issues forcing the rise are tamed”.

President Muhammadu Buhari had presented the budget to a joint session of the National Assembly on Nov. 7, 2017, only for the lawmakers’ to jerk it up by additional N500bn before passing the Bill which now awaiting for presidential assent.