Nigeria may be struggling to raise crude oil production to its budget target of 2.3 million barrels per day, but analysis shows that production shortfalls this year is not to blame for the weaker crude oil exports forecasted this year.
So far this year, average crude oil production has been around 2.02 mbpd according to data compiled from National Bureau of Statistics (NBS) which puts this current year production slightly above last year’s average daily production of 1.99 mbpd. However, with crude oil production remaining relatively flat in both years, crude exports is expected to fall about 12 percent this year due to weaker crude oil prices in 2019.
According to data obtained from Central Bank of Nigeria (CBN), average crude oil price in 2018 was $72 per barrel compared with this year’s average price of $65 between January and October. This means that Nigeria may be set to lose as much as $1.6billion in crude oil exports due to the 10 percent drop in average crude oil prices this year. Based on current projections, analysts expect Nigeria’s crude oil exports to drop from $54.5 billion to $47.7 billion, representing a drop of around 12 percent.
Already the Federal Government is feeling the pinch of lower crude oil prices as the government budget performance report shows that oil revenue in the first half of the year was only N900 billion compared to the budget target of around N1.84 billion.
“A drop in crude oil prices can be very catastrophic to the Nigerian economy and the government’s finances,” said Maju Eldad, Lecturer in Economics Department at Federal University Kashere, Gombe. “Oil represents its biggest exports and highest contributor to the foreign external reserves. Lower crude oil prices means that Nigeria will be forced to deplete its foreign reserves in order to protect the value of the currency from any sudden attacks or depreciation,” Eldad added.
Brent crude oil prices closed the week lower, falling from $62 at the start of the week to $59.4 as at Friday afternoon. Crude oil price is now once again below the crude oil price benchmark at the same time that daily production remains around 350,000 barrels below the country’s budget target, putting the public finances under tremendous strain.
IFEANYI JOHN
