Nigeria’s oil revenue drops by NGN 265bn

The slump in the global price of crude oil has resulted in a drop of NGN 265.28bn in the revenue generated by Nigeria in the fourth quarter of 2014 when compared to what the country garnered in the preceding quarter of 2014 according to Punch Newspaper, Nigeria.

Oil prices fell from over USD 100 per barrel in early 2014 to as low as USD 40 per barrel by December 2014. Over 70% of the Nigerian government’s gross revenue comes from the sale of crude oil and any fall or increase in the price or production of the commodity invariably has some effect on the revenue earned by the Federal Government.

Data obtained on 24 April 2015 from the Office of the Accountant-General of the Federation (OAFG) for the fourth quarter 2014, as analysed by the Central Bank of Nigeria, showed that Nigeria’s gross oil revenue fell by 15.49%. Further findings revealed that as a result of the plunge in crude oil prices and its attendant effect on Nigeria’s earnings, the country’s gross oil revenue was unable to meet 19.17% of its budgetary target. The OAGF, in a report released by the CBN, stated that at NGN 1.448 trillion, gross oil revenue declined respectively by NGN 265.28 billion or 15.49% and NGN 90.56 billion or 5.89%, below the levels in the third quarter of 2014 and the corresponding quarter of 2013. Furthermore, the oil revenue accounted for 72.4% of gross revenue during the reviewed quarter, while the balance of 27.6% was from non-oil sources. As a result gross oil revenue met 80.83% of budgetary target of NGN 1.791 trillion.

As a result of the global crash in oil prices, the country’s gross federally-collected revenue during the period under review also fell by NGN 480.74bn or 19.38% and the amount of revenue collected was NGN 2.0 trillion (to meet 81.8% budget performance) according to the report.

Oil producers in Nigeria and experts in the sector have stated that Nigeria may lose over NGN 2 trillion in 2015 alone, if the fall in the crude oil prices persists. The Oil Producers Trade Section (OPTS), a 22-member group comprising local and international firms, that form 96% of the total oil and gas production in Nigeria, stated that the fall in crude oil prices had exposed Nigeria to a severe revenue squeeze.

The OPTS Chairman, Mrs. Elizabeth Proust, said the group projected that Nigeria’s revenue might decline by USD 10 billion in 2015. In addition, she said, “There is no doubt that the crude oil prices that we are experiencing today are having a severe adverse impact on the revenues of both producers and host governments globally. We estimate that if crude oil price average USD 53 per barrel in 2015, compared to USD 77.5 in 2014, the Federal Government of Nigeria’s oil and gas revenue will decline by about USD 10bn this year, or a gut wrenching 30%.”

Likewise, the Chairman of the Society of Exploration Geophysicists, Nigeria, Prof. Charles Ofoegbu, told Punch Newspaper, Nigeria that the oil boom era had come and gone, stressing that it was high time that the Federal Government diversified the Nigerian economy. He stated, “The oil boom era has come and gone. We must go back and begin to look at the solid minerals sub-sector. And then of course, government should put in place the enabling environment to encourage mining. As of now, not much has been done but there have been a lot of meetings and pronouncements.”

Economists and Financial analysts are of the opinion that the fall in revenues for the federal government in Nigeria will have an obvious and immediate impact on some of its social and infrastructure projects. The lower fiscal spend and forced austerity  measures’ may mean that some key projects will be postponed or abandoned due to budgetary concerns, hence impacting slow down economic growth.