2019 Budget Under Review Owing to Oil Price Crash – REPORTS
Oil Price Crash Forces Review of 2019 Budget Benchmark Against the backdrop of a long and steady decline in the international oil price, the Federal Government may have started reviewing developments in the global oil market with the intention of adopting a new oil price benchmark for its 2019 budget. BY Emmanuel Ujah, Udeme Akpan and Victor Young
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Against the backdrop of a long and steady decline in the international oil price, the Federal Government may have started reviewing developments in the global oil market with the intention of adopting a new oil price benchmark for its 2019 budget.
This came as the decline appeared to have bottomed out, yesterday.
The N8.6 trillion budget was based on $60 per barrel (p/b) benchmark at a time international oil price was around $75p/b.
Though the price later escalated to about $86p/b, it began a downward trend about seven weeks ago closing at a year low of $59p/b last weekend. It, however, increased marginally to $61 as at yesterday, which is still a threat to the 2019 budget, especially as a gap of at least $10 is required between the budget benchmark and prevailing oil price.
Consequently, in an email to Vanguard on Sunday, Director-General of the Budget Office, Mr. Ben Akabueze, stated: “$60 oil price benchmark for 2019 was based on our review of projections from multiple sources by knowledgeable organisations on the subject of oil pricing. It was deemed quite conservative four months ago when we settled for $60.
“We are willing to review the price projection downwards if it becomes clear that it is no longer sustainable. An alternative benchmark will be determined, following same process explained above.”
But Vanguard oil price monitor indicated a significant positive shift in the oil price trend as the commodity traded above $60/pb, yesterday.
However, explaining further on challenges of Nigeria’s oil economy, Akabueze said: “Current oil production in Nigeria is about 2.1 million barrel per day, mbpd, still below the budget projection of 2.3 mbpd.
“OPEC production numbers do not include condensates whereas the number stated in the budget and NNPC’s reports include condensates. Nigeria has capacity to produce up to 450,000 bpd equivalent of condensates.
“Continuing diversification of the economy, domestication of raw/intermediate materials sourcing for manufacturing, formalization of the non-oil sector, as well as stronger focus on tax administration/legislation will ultimately break the dependence on oil for government revenues.”