The fall in price of crude from $50 to $48 a barrel as at yesterday is threatening the revenue projections of the Federal Government. With approved crude oil price benchmark in the 2017 budget at $44.50 per barrel, about $3.5 is now being earned as excess revenue per barrel of crude oil exported at the prevailing market price of $48 a barrel. But, at the former price of $50 per barrel, the country was retaining about $5.5 as excess revenue per barrel.
Therefore at Nigeria’s production figure/ Organisation of the Petroleum Exporting Countries (OPEC) quota of 2.2 million barrels per day, Nigeria’s excess crude oil revenue have dropped from $12.1 million to $7.7 million per day as at yesterday.
For example, price of West Texas Intermediate (WTI) $48 per barrel while global benchmark Brent fell as low as $49.71 in morning trade. This however, represent lowest since November 30 when OPEC countries agreed to cut output.
Also, the price OPEC basket of 13 crudes stood at $48.28 a barrel, compared with $49.23 the previous day, according to OPEC Secretariat calculations. Although a little above Nigeria’s crude oil prices benchmark of $44.50 a barrel, experts believed that a major decline in the price of oil would lead to a massive depreciation of the currency, adding that some of the states outside of the oil-producing regions might find themselves in a situation where they are not able to pay salaries.
To mitigate the lowering oil prices, Deputy-Director at Emerald Energy Institute for Energy & Petroleum Economics, Policy & Strategic Studies, University of Port Harcourt, Prof. Chijioke Nwaozuzu, stressed the need for Nigeria to secure significant new market share in the USA and India as a new source of revenue for the Nigerian treasury.
Head, Energy Research at Ecobank, Dolapo Oni said the current lower price trend is going to have a major effect on Nigeria if the trend continues, adding that the trend is likely to continue until the market adjusts the volume of oil supply available.
Despite the drop in crude oil prices which may negatively affect Nigeria’s oil revenue, OPEC Secretary General, Muhammad Barkindo, said that although 2016 was a tough year for all producers, the 2017 forecast for the country is positive, with a growing output target and some exciting new discoveries, such as the Owowo field. “Analysis suggests that incremental growth will be recorded for the next three years.”