Sanusi: CBN Will Respond to Oil Benchmark Increase

05 Jan 2013

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Sanusi Lamido Sanusi

By Yemi Adebowale   

The Governor of the Central Bank of Nigeria, Sanusi Lamido Sanusi, yesterday reacted to the increase in the oil price benchmark in 2013 budget passed by the National Assembly, from $75 proposed by the Executive to $79, saying the CBN will adopt an appropriate monetary stance in response to it.

The National Assembly had on December 20 passed a N4.987 trillion budget for the 2013 fiscal year. The approved budget was N63 billion more than the N4.924 trillion proposed by the executive. The difference arose out of the change in the oil price benchmark from $75 to $79.

Some Nigerians had expressed worry over the oil benchmark increase, particularly because of the volatility of the crude oil market. They felt a high oil benchmark would hurt the economy if there were a sudden slump in crude oil price.

But the CBN governor who spoke exclusively to THISDAY yesterday night said: "The Central Bank was consulted fully by the finance ministry in arriving at the benchmark of $75 a barrel. Our technical team looked at the long-term trajectory of oil prices; the benchmark used by other oil producing countries and the need to save as much as possible of any oil price windfall in view of the dark clouds in the global economic horizon.

"We also explained our support for the minister on the benchmark to the House Committee on Finance. The National Assembly is not obliged to abide by the advice of the CBN. And since the bill has been passed with a different benchmark, it is now purely the decision of the President to act on it. Again, he is not obliged to accept advice from only one or two sources and I presume, he will decide after wide consultation.

"Taking into consideration a variety of views, we (CBN) therefore have nothing to say at this point, but will adopt an appropriate monetary stance in response to whatever budget is passed in order to maintain stable inflation and exchange rate and a healthy reserve buffer."

On the need for Nigeria to cut spending using the US financial crisis as an example, Sanusi added: "Even though, the United States had just managed to avert falling over the edge of its so called ‘fiscal cliff,’ nothing has changed except rhetoric.

"In February, the White House and the congress will deal with the tough question of spending cuts, what gets cut and by how much may actually lead to a showdown or recession."

The CBN governor had in an earlier view stated that $75 should be the oil benchmark limit for the 2013 budget.

He made known this position before the Executive and the legislature during the preparation of the 2013 budget.

"The view of the CBN is that $75 should be the oil benchmark limit. We made this view known to the Executive and the Legislature. Now that the budget has been passed, it is left to the Executive to act on it. It is not appropriate to make further comments before it is signed," said the CBN governor.

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