Senate passes MTEF, approves Buhari’s N2.32trn loan

The Senate, on Wednesday, passed the 2017-2019 Medium Term Expenditure Framework (MTEF) and the Fiscal Strategy Paper (FSP).

The Red Chamber retained the exchange rate at N305 to $1 as proposed by President Muhammadu Buhari. It however raised the oil benchmark from $42.50 to $44.5 per barrel.

The Senate also approved Federal Government’s borrowing plan of N2.321 trillion, made up of N1.253 trillion as domestic borrowing and N1.067 trillion external borrowing.

The committee charged the Federal Government to be focused and ensure that the loans are used to finance critical projects capable of increasing productivity which will in turn yield revenue in servicing the debt.

The decision of the Senate, followed the adoption of the recommendations of the Joint Senate Committee on Finance, Appropriation and National Planning on the document.

Presenting the report, the joint committee chairman, Senator John Enoh, observed that the huge gap between the official exchange rate and what is obtainable in the parallel market had created what he described as several loopholes in the system.

According to him, there has been a slight improvement in the global demand for crude oil, adding that “a weaker US dollar and improving sentiment on broader financial markets have also boosted crude oil price.”

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Defending the decision of the joint committee to raise the oil benchmark, Enoh said international oil industry watchers have forecast that oil prices are gradually heading towards $60 dollars per barrel.

The committee retained 2.2 million barrel per day oil production volume. Enoh observed that the projection is achievable if the Federal Government makes concerted efforts to reduce the tide of militancy in the Niger Delta region.

He recalled that disruption of oil installations in the region resulted in fluctuations in oil production in 2016 and pointed out that production dropped from 1.912 million barrel per day in January 2016 to 1.721 million barrel per day in June before later declining to 1.721 million per day in October.

The Senate has approved government’s independent revenue projection of N807.57 billion as contained in the revised MTEF and FSP just as it approved the projected N5.122 trillion non-oil revenue in 2017. It tasked the revenue collection agencies to “intensify their revenue collections drive to boost the non-oil components of the revenue.”

Senator Ben Murray-Bruce faulted the approval of N305 exchange rate, describing it as baseless and out of tune with the current realities, bearing in mind that dollar cannot be exchanged at that rate any where in the country.

He said: “You have pegged the exchange rate at N305 to the dollar. Now, this is fine, however, nobody in this room today can go to the bank and buy the dollar at N305 and so, we have an exchange rate that is ridiculous. The black market is about N500 and it is only about N200 differential. Between 1960 and 1980 despite the civil war, when (Chief Obafemi) Awolowo was federal Commissioner for Finance, the country was moving on without borrowing a penny. In the exchange rate between the official and black markets, there was no differential. In 1980, it was $1 97cents to the Naira and the difference between official and black market was N10kobo.

“When (Shehu) Shagari was overthrown in December 31st in 1983, the official rate of exchange was N3 to the dollar and the black market was N4 to the dollar. So, it was a N1 differential. Three years ago, it was a N10 to N15 differential between the black market and the official rate.

“Today, it is N200 and so, it is better for businessmen to round trip than to manufacture. The point I am making is that the exchange rate we have is encouraging round tripping. When the exchange rate encourages round tripping, we will never close the gap because the richest people in Nigeria today are treasurers of banks. The exchange rate is wrong. N305 is unrealistic and that is the point I am making.

“The currency should float and it has been floating since independence and for it not to float means that the naira will never be strengthened. For the past two years, the naira has consistently been devalued from N225 to N500. Let us address the issue of foreign exchange. Please, let it float,” Murray-Bruce pleaded.

By Ehisuan Odia…

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