Adoption of Appropriate Benchmark Price for Crude Oil in Nigeria (an Imperative Study of National Savings from 2000 - 2005)

15 Pages Posted: 30 Oct 2009

See all articles by Orok Ekpo Orok-Duke

Orok Ekpo Orok-Duke

Cross River University of Technology (CRUTECH)

George Akpan Ekott

Cross River University of Technology (CRUTECH)

Agba D. O. Otonkue

Cross River University of Technology

Date Written: October 28, 2009

Abstract

Recently in Nigeria a benchmark price for crude oil was adopted for the purpose of estimating oil revenue in order to mitigate the unnecessary disruptions of the annual budgetary processes and stabilize revenue. This strategy was initially experimented for the appropriation bill of 2002 and internalized in subsequent years. As a strategy of adopting a benchmark price for crude oil, the market price presupposes that there was a consensus for compulsory national savings to build up a fund which would cushion the effect of shocks that could result from unfavourable future developments as well as ensuring high quality spending. However, the method of arriving at the benchmark price for crude oil for the budget has been criticized as being highly subjective and lacking transparency, and that it was not based on any of the GAAP (generally accepted accounting principles). This has often resulted in heated debates and intensive negotiations between the executive and the legislative arms of government; and this often leads to the delay in the release of the appropriation bill and the attendant adverse impact on the economy.

Keywords: crude oil pricing, benchmark price, national savings, budgetary process

JEL Classification: G12, G15, G18

Suggested Citation

Orok-Duke, Orok Ekpo and Ekott, George Akpan and Otonkue, Agba D. O., Adoption of Appropriate Benchmark Price for Crude Oil in Nigeria (an Imperative Study of National Savings from 2000 - 2005) (October 28, 2009). Available at SSRN: https://ssrn.com/abstract=1495569 or http://dx.doi.org/10.2139/ssrn.1495569

Orok Ekpo Orok-Duke (Contact Author)

Cross River University of Technology (CRUTECH) ( email )

P.M.B 1123
Calabar,
Cross River State, WA Cross River 234
Nigeria

George Akpan Ekott

Cross River University of Technology (CRUTECH) ( email )

P.M.B 1123
Calabar,
Cross River State, WA Cross River 234
Nigeria

Agba D. O. Otonkue

Cross River University of Technology ( email )

P.M.B 1123
Calabar,
Cross River State, WA Cross River 234
Nigeria

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