The federal government and the oil and gas producing companies may have lost an estimated $11.5billion to the drop in the price of Brent crude oil from $115 per barrel in June to $68.62 yesterday, THISDAY has learnt.
With Nigeria producing about 2.4 million barrels per day and exporting 2.2 million barrels per day, the country may have lost as much as $11.5 billion between June and November this year, forcing the federal government to introduce a raft of measures to shore up its revenue in the face of dwindling earning from crude oil, its main revenue source. The situation may even become more dire should the slide persist.
When THISDAY called the Minister of Finance and coordinating Minister of the Economy, Ngozi Okonjo-Iweala late last night for confirmation of the amount lost so far, she said: “It is not a straight forward arithmetical issue. It is pretty late and it is something we would need to sit down and look at.”
Also, the Director General of the Budget Office, Bright Okogwu said he would need to look at the module that the figures were based on and that he would not comment on the figures off hand.
Worried that the price would tumble below $80 per barrel, the federal government revised the 2015 budget benchmark to $65 which is below the $77.50 used in 2014.
Abundant supply of crude oil to the international market by the member countries of OPEC and the big jump on US crude stockpiles are said to be some of the factors responsible for the current downward slide in the price of crude oil.
With shale gas/oil boom in China and the US, there is falling demand of imported crude oil by the two countries which used to be the major buyers at the international market.
The International Monetary Fund, IMF Mission Chief for Nigeria, Mr. Gene Leon, said measures taken by the Nigerian government in response to fall in oil price are in order.
The IMF chief who said this in a statement in response to media requests commended government’s action so far, but added that the federal government should get ready to do more if the situation deteriorates.
He said: “In a combination of actions, most recently the communiqué after the Central Bank of Nigeria’s Monetary Policy Committee meeting of November 24-25, the authorities have announced a set of policies aimed at mitigating the impact of the recent significant fall in global oil prices on the economy. These include: adjusting the exchange rate, resubmitting the Medium Term Expenditure Framework to the National Assembly with proposed tax and expenditure measures to achieve the deficit target consistent with a lower budget oil price, and tightening monetary policy.
“We are supportive of and welcome these actions, which we view as complementary and moving in the right direction. “Of course, the global situation remains fluid and the key issue is being ready to manage downside risks and for the authorities to be prepared, based on assessments of credible scenarios, to consider additional measures, as necessary.”
The current volatility in the prices of crude oil at the international market escalated, after the Organisation of Petroleum Exporting Countries (OPEC) refused to cut output, despite what is seen as a supply glut.
Saudi Arabia blocked calls from poorer members of the OPEC to cut production to stem a slide in global prices.
It has also emerged that Saudi Arabia’s Oil Minister told fellow OPEC members to combat shale oil boom, arguing against cutting crude output in order to depress prices and undermine the profitability of North American producers.
Ali al-Naimi was said to have won the argument at last meeting, against the wishes of ministers from OPEC’s poorer members such as Venezuela, Iran and Algeria which wanted to cut production to reverse a rapid fall in oil prices.
The poorer members, who were however not prepared to offer big cuts themselves, yielded to Naimi’s pressure to avoid a clash with the Saudis and their rich Gulf allies.
Naimi reportedly spoke about market share rivalry with the United States, making those who wanted a cut to understand that there was no option to achieve it because the Saudis want a market share battle.
OPEC’s Secretary General, Abdullah al-Badri also confirmed OPEC was entering a battle for market share.
In a communiqué at the end of the meeting, OPEC said it reviewed the oil market outlook, as presented by the Secretary General, in particular supply/demand projections for the first, second, third and fourth quarters of 2015, with emphasis on the first half of the year.
The body also considered forecasts for the world economic outlook and noted that the global economic recovery was continuing, albeit very slowly and unevenly spread, with growth forecast at 3.2 per cent for 2014 and 3.6 per cent for 2015.
It also noted, importantly, that, although world oil demand is forecast to increase during the year 2015, this will, yet again, be offset by the projected increase of 1.36 million barrels per day in non-OPEC supply.
Recording its concern over the rapid decline in oil prices in recent months, the conference concurred that stable oil prices at a level which did not affect global economic growth but which, at the same time, allowed producers to receive a decent income and to invest to meet future demand – were vital for world economic wellbeing.
Accordingly, in the interest of restoring market equilibrium, the OPEC decided to maintain the production level of 30 mb/d, as was agreed in December 2011.
Before the meeting, there were expectations from the global oil and gas industry that the cartel would effect production cuts of between one million barrels per day and 500,000 barrels per day in response to the falling oil prices.