Ten (10) reasons not to believe everything you are told about the budget or falling oil prices By Taiwo Oyedele

Taiwo Oyedele is the Partner in charge of Tax and Corporate Advisory with PWC, and here, he gives us ten (10) cogent reasons not to believe everything we are told about the budget or falling oil prices. Read and Share your thoughts........


1. Why is the economy suddenly in a panic mode when year to date, crude oil has sold and still selling above the benchmark price for the 2014 budget of $77.50 per litre? We should be talking about excess or surplus for the year not shortfalls.
2. A key factor which has impacted the expected surplus is less than expected daily production of crude but the combined effect of lower than budget production and higher than expected price should still be a net surplus.
3. Given that oil price is falling there should be no need for fuel subsidy. If you remove fuel taxes in many countries the actual cost per litre will be less than N97 equivalent. For instance, in the US, a litre sells for around $1 with half of the price being fuel tax which means actual fuel cost is $0.50 (N83). At N97 per litre, it is actually the people that are subsidising government.
4. A related issue calls to question the sincerity of government on fuel subsidy similar to the way we were assured of constant electricity yet the budget for fuelling at the State house was increased.
5. Since government has reduced the crude oil benchmark for 2015 to $73 per litre, why is there still about N500b budget for fuel subsidy in 2015? If crude oil price is that low, then no subsidy is required. If fuel price goes up, then there will be excess crude windfall part of which can be used for subsidy. Logically, government should not budget for fuel subsidy as it will always take care of itself.
6. The exchange rate used for the proposed budget and Medium Term Expenditure Framework is N162. In view of the devaluation of Naira to an average of N168, government should have more Naira for the same dollar revenue and therefore less impact of falling oil price on expenditure.
7. By the way, why do we start our budget from a zero base every year? What happens to the unspent amounts from previous years due to budget under-performance?
8. Why do we not subject actual implementation of budget to value for money audit? The question is whether what “it is” is as good as “what could have been?”
9. What is the use of Security Votes and funds for Constituency Projects that are shrouded in secrecy?
10. Why does government borrow money from the public and pay huge sums to service the debt despite our external reserve? You might say it is to mop up excess liquidity and control inflation but ironically the excess liquidity is always created by government releasing monthly allocations which are then paid to banks when they could just have kept the money with the CBN.