There are strong indications that Nigeria is currently being faced with uncertainties over the implementation of 2018 budget which was benchmarked at $50.5 per barrel. Crude price has fallen to less than $60 per barrel from above $80 per barrel in 2018.
This has been generating some concern among industry stakeholders including the Minister of State for Petroleum Resources, Dr Ibe Kachikwu, who said the country is having a tough time meeting commitments to fiscal responsibilities.
Kachikwu, who was quoted in a statement, stated that “Nigeria is facing uncertainties over budgeting as a result of falling oil prices. The country is also having a tough time meeting commitments to fiscal responsibilities.
“This portends danger because what it does is that, for the first time, we have been alarmed as one of the countries that rely almost solely on receipts from oil. There is the uncertainty of budgeting and meeting fiscal responsibilities.”
The minister expressed concern over the fall in oil prices, saying it poses danger to the country’s economy.
“The tumbling of oil price from $82 per barrel to about $61 over the past few weeks is the toughest black Friday that we have faced. The price has tumbled by about $30 in a short period of about 54 weeks.
“What this says to us is that ultimately, we have to find the world’s oil order in which prices are stable and investors can make the right decisions. Everyone has to work together including President Trump to protect consumers as well as producers because, unless we have a steady and determinable price for oil, we are not going to have investments. Our ability to fund budgets and countries that do not add additive value to oil resources will have difficulties,” he said.
Speaking with the Nigerian Tribune on the issue, the former Chairman of the Petroleum Technology Association of Nigeria (PETAN), a body of indigenous operators in the oil and gas sector, Mr Emeka Ene, lamented that “it remained worrisome that without oil, we cannot grow the economy.”
He worried that a low oil price regime for Nigeria will signify dearth of infrastructure because capital spending will be the worst hit.
He said Nigeria must begin to look inward in order to move away from oil, regretting that a lot of oil firms that have made huge investment into the sector are now discounting such.
Ene warned that the implementation of the 2019 budget will run into murky waters if government does not adjust its spending pattern by blocking leakages and wastages.
‘‘If this budget must succeed, then we must cut our coat according to our cloth. The issue of subsidy must be looked into if we are serious about the success of the 2019 budget.
“The game is almost over for oil. We should begin to take practical steps that will gradually move us away from our dependence on oil. The world would not wait for us,’’ he said.
Ene disclosed that, despite the low oil price regime, Nigeria’s cost of production per barrel of oil is still in the region of about $30 per barrel compared to Saudi Arabia which is in the region of less than $10.
It would be recalled that the Federal Executive Council, on October 24, approved the government’s proposal of N8.73 trillion for the 2019 budget, and pegged the price of crude oil at $60 per barrel, up from $50.5 for the 2018 budget.