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Low oil production puts Nigeria’s 2024 budget revenue at risk

NIGERIAN government has expressed worries that its 2024 budgeted revenue is at risk should oil production remain 27.0 per cent below its budgetary provisions.

Already, the government has projected over N15 trillion in revenue in its 2024 approved budget, however, low oil production triggered by oil theft in the oil-rich Niger Delta and divestment of oil stakes by some international oil companies is taking its tolls on the projected revenue

In a recent draft fiscal document leaked to the media, the government, however, expressed worries that it might not meet its revenue projection for 2024.

The report, ‘Accelerated Stabilisation and Advancement Plan (ASAP)’ was presented to the President, Bola Tinubu, by the minister of finance and coordinating minister of the economy, Wale Edun, on Wednesday, June 5

It states in part, “Our ability to achieve the 2024 Budgeted revenue step-up of 77.4 per cent from 2023 actual is at risk should oil production remain 27.0 per cent below budget. Fifty per cent of the annualised YTD (year-to-date) variance suggests a lower-than-budgeted revenue of N15.7 trillion at the current run rate.”

According to the report, Nigeria’s retained revenue for January and February 2024 was approximately 60 percent of its budget, largely driven by lower crude oil production volumes at 74.5 percent of the budget projection.

It shows that “if current revenue shortfalls persist, the revenue for 2024 is unlikely to exceed N15.8 trillion.”

The report noted that the current oil production at 1.4 million barrels per day (bpd) falls short of the 1.78 million bpd 2025 budget benchmark.

It also falls short of the 1.5 million bpd quota by the Organisation of Petroleum Exporting Countries (OPEC), indicating that the government might not meet its targeted 2024 budget revenue.

The ICIR has in December 2023 reported that the country’s 2024 crude oil benchmark was unrealistic.

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It recalled that President Tinubu had at his budget presentation on November 29, 2023, said his led administration had “adopted a conservative oil price benchmark of 77.96 US dollars per barrel and daily oil production estimate of 1.78 million barrels per day.”

The Nigerian government and its state-owned oil company, Nigerian National Petroleum Corporation Limited (NNPCL), have continued to blame the low production output on pipeline vandalism, militancy, and other insecurity as oil production declined.

Further in the ASAP report, the Nigerian government stated that the oil sector, as the fiscal anchor for the country’s economy, has underperformed due to years of underinvestment, inefficiency, and opacity, leading to lost revenues and jobs and a grossly underserved local energy market.




     

     

    It said Nigeria’s comparatively high cost of oil and gas operations (mainly due to oil theft, vandalism, and unattractive fiscal policies) has negatively impacted investment levels.

    It noted that an uncompetitive investment climate resulting in low oil production growth caused depressed fiscal income to the federation account, illiquidity in foreign exchange markets, and domestic energy insufficiency.

    “Continued reliance on fuel imports despite significant amounts spent on government-owned refineries over the years constituting significant foreign exchange drain on the economy and difficulties in reducing fuel subsidies to zero given the current inflationary and consequent social pressures,” it said.

    Apart from oil theft, TotalEnergies, Shell and  some other International Oil Companies IoCs are divesting their assets away from Nigeria as some of them cited concerns of unfavourable business environment investment risks. Total, findings have shown is increasing its stakes in Angola.

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