The $80 per barrel oil benchmark proposed by the National Assembly for the 2013 federal budget is over optimistic and can lead to inflation, Finance minister Ngozi Okonjo-Iweala has said.
The N4.9 trillion budget proposal submitted to the lawmakers, last week by President Goodluck Jonathan was based on $75 per barrel benchmark.
In a statement by Senior Special Assistant to the Minister of Finance, Paul C Nwabuikwu said "The legislature's proposal is premised on an overly-optimistic outlook of global oil prices.
"The current world oil price is not based on actual economic fundamentals, but rather on uncertainties due to conflict in the Middle East. Nigeria cannot base its plan simply on the expected misfortunes of others."
The statement said that an overly high benchmark price is likely to lead to higher inflation, decline in the value of the naira, lower savings and reduced investment.
The statement said that government chose a prudent oil benchmark price of $75/barrel for the 2013 period because it is below current world market prices.
It said that it is based on moving averages of the world oil price and government's simulations allowing for uncertainty in world oil price movements.
It said that the model was used to estimate 5-year and 10-year moving averages of the oil price and arrived at the average of approximately $71/barrel, which was then rounded up to $72/barrel (the 2012 Budget Level).
"This is a standard technique commonly used by commodity-dependent countries to protect them against the volatilities of oil," the statement said.
It said that a prudent oil benchmark price would ensure that Nigeria saves more, and increases its external reserves.
Daily Trust