Nigeria’s 2019 budget of N8.9 trillion may have suffered a setback as brent crude, the international oil benchmark, on Tuesday trad below $60, the 2019 budget benchmark.
As at 6.50pm local time, the commodity traded at $59.50 per barrel, losing 50 cents. Earlier, it dipped by $2.10 to trade at $59.79 per barrel. It plunged to around $61 per barrel last Thursday from $65 on Wednesday.
During the preparations of the budget estimates, crude oil price was around $80, thus giving the Federal Government the comfort to ignore the $50 benchmark proposed in the Economic Recovery Growth Plan (ERGP) and to opt for $60 as the oil benchmark on which to base revenue projections for the budget.
Concerns that Iranian oil exports to the global market would drop because of renewed sanctions by the United States had pushed the price slightly above $80 per barrel for the first time since November 2014.
However, the unexpected rise in the US crude inventories, coupled with weaker outlook for global demand, has continued to push down oil prices despite the efforts of the Organisation of Petroleum Exporting Countries (OPEC) and non-OPEC producers, led by Russia, to reduce excess supply in the global market.
President Muhammadu Buhari, while signing the N8.9 trillion budget on May 27, 2019, based oil production at 2.3 million barrels per day with an oil benchmark price of $60 per barrel.
If the trend continues, Nigeria will be losing about $115 million daily. This was deduced when 50 cents is multiplied by 2.3 million barrels.
The development may further put the government under pressure to seek alternatives means of generating revenue to be able to service both its domestic and external borrowings and fund both capital and recurrent expenditure.
Meanwhile, a glut of light sweet crude in the Atlantic basin owing to a surge in U.S. exports and homeless North Sea cargoes has sent differentials for Nigerian sliding.
Around 15 cargoes of Nigerian crude remain from the August loading programme, with the prompt barrels dragging down prices for September cargoes yet mostly failing to attract much buyer interest despite seller mark-downs.
Two cargoes of prompt-loading Forcados still await a buyer, with buyers holding out for a price well below a premium of $2 compared to dated Brent – among the lowest values in 2019.
Bonny Light and Qua Iboe were said to be trading below dated Brent plus $2.00.