Analysts say the Federal Government’s oil benchmark price of $42.5 per barrel for 2017, $45 in 2018 and $50 for 2019 for its budget calculations, while realistic and in line with current trends, projections for production volumes has them calling for caution.
This is against the backdrop of militant attacks on oil and gas infrastructure that have reduced production to 30 year lows, leaving Nigeria trailing Angola as Africa’s highest crude oil producer.
“I think the projections of $42.5 per barrel is realistic judging by the fact that oil prices have started to recover however slightly, but my concern is on production volumes,” said Taiwo Oyedele, Head of Tax at PwC.
Oyedele added, “The problems in the Niger Delta have affected production volumes and this has impacted 2016 revenues. The government now struggles to pay salaries, so I doubt that this projection is realistic and the Federal Government has to look into it to forestall the current situation.”
Joel Bisina, consultant and expert in conflict management, told BusinessDay that until there is the political will to find a lasting solution to the problem in the Niger Delta, then the projections may not hold true.
“The current problems in the Niger Delta have to be resolved before there can be improvement in production volumes,” Bisina said.
Udoma Udoma, Nigeria’s budget minister yesterday announced that Nigeria is assuming oil production of 2.2 million barrels per day (bpd) in 2017, 2.3 million bpd in 2018 and 2.4 million bpd in 2019.
“These are our key assumptions for the 2017 to 2019 medium term expenditure framework,” Udoma said, addressing a forum in Abuja. “We are also looking at an exchange rate of N290 per dollar in 2017, N290 in 2018 and same N290 in 2019.”
Nigeria’s 2016 budget is based on oil production of 2.2 million barrels per day at 38 dollars a barrel but production since January has been below 2 million bpd on account of militant activities and shutting of prominent terminals for repairs.
Meanwhile the Federal Government has said that it is in talks with representatives of militant groups in the Niger Delta. It recently met with selected groups of militants from the region in a bid to halt attacks on oil pipelines in the region.
Last week, Kemi Adeosun, finance minister announced that the federal, states and local governments shared N559.03 from the FAAC account in June, the highest since 2016 fiscal year.
Rather than the oil sector contributing the highest to Federal earnings as has been the situation in the past, Adeosun attributed the increase in revenue to efficiency in collection by the revenue generating agencies.
“The big cause of the increase is the improvement of non-oil revenue from FIRS. The FIRS improved its performance between last month and this month by N165 billion.
“And that accounted for the change in revenue and also, there was an improvement of N12.6 billion by the Nigeria Customs Service, as well as the exchange gain of N79.2 billion,” She said.
ISAAC ANYAOGU
