The Minister of Budget and National Planning, Senator Udo Udoma, has explained that the Federal Government has maintained the 2019 budget oil price benchmark at $60 per barrel. This is as a result of the fact that it is strongly believed that the oil price would be very close to $70 per barrel this year.
Senator Udo Udoma noted that the government did not just come to this conclusion without taking every aspect into perspective. The government organised a lot of meetings with both local and international experts before the reached that conclusion.
From all indications, this is a very good plan because not long after the budget was made known to the National Assembly, the price began to look up and by the third week in January 2019 it was well above $60 and the year’s peak price is estimated to be $62.8. Things are really looking up for this year’s budget.
Normally, the oil price benchmark is set at roughly 15 per cent below the ruling market price at the time of budget preparation. One important factor that should not be overlooked is that the country depends largely on oil as a source of revenue and foreign exchange, that being the case any sharp shift in the oil price benchmark would greatly affect the budget.
Moreso, there is need to be concerned and cautious over recent occurrences in the international oil market that gives signs of possible threats to the country’s fiscal plan 2019, whether or not things go well on the political aspect.
Over the past few trading days, oil price has not been steady and has varied four times obviously indicating instability. In addition, the price has stayed below $62 after the initial rise to $62.8 in the first week of the year.
It is therefore not wrong to say that care should be taken over the 2019 budget benchmark. There is need for special and fundamental developments in the international oil market set up to achieve a price close to $70, which is not a bad range for the budget.