… appreciates by N318bn per month
Nigeria’s benchmark for crude oil price was retained at $40/barrel, as the country may have earned over N318bn additionally in February.
This is as a result of the increase in crude oil price in the past one month.
The Minister of Finance, Budget and National Planning, Zainab Ahmed stated this at the virtual presentation of the 2021 Federal Government-approved budget in January.
However, since February this year, Brent, the oil against which Nigeria’s crude oil is priced, had traded at an average that was higher than $60/barrel. It traded for $63.81/barrel on Thursday.
The commodity, which crashed to below $20/barrel during the second quarter of 2020, had rallied in price since this year, trading above $63/barrel for the most part of February 2021.
Figures obtained from the Federal Ministry of Finance, Budget and National Planning on Thursday showed that it traded at $65.18/barrel, $66.71/barrel, $67.15/barrel and $66.26/barrel on February 23, 24, 25 and 26, respectively.
Trading at an average of about $60/barrel for the past 30 days, it implies that the Federal Government has been earning an additional amount of about $20/barrel when compared against the 2021 budget benchmark of $40/barrel.
Also, Ahmed had stated in January that crude oil production was projected to increase from 1.8 million barrels per day in 2020 to 1.86mbpd in 2021, as economies recover from the recession, and moderated by OPEC+ quota agreements.
“Although Nigeria’s total production capacity is 2.5mbpd, current crude production is about 1.7mbpd, including about 300,000bpd of condensates, which indicates compliance with OPEC quota,” the finance minister had stated.
From the minister’s statement, Nigeria’s crude oil production without condensate would be 1.4mbpd.
With an additional $20/barrel income, when marched against a benchmark of $40/barrel, it implies that the government’s earnings in the past 30 days from the sale of 1.4mbpd crude oil, at an official exchange rate of N379/$, is about N318.4bn.
This implies that the Federal Government has been earning more from crude oil in the past 30 days than it projected in its 2021 budget.
Ahmed had also in January expressed hopes that the crash in oil prices would not extend beyond this year, although she observed that this had led to a severe funding gap for the government.
“There is a significant fall in crude oil prices resulting into a very huge funding gap for the government.
“This trend is projected to continue into 2021, hopefully, not beyond, as the pandemic continues to disrupt economic activities globally,” the minister had stated.
Meanwhile, operators in the oil sector told our correspondent on Thursday that although the rise in crude oil price meant more revenue for Nigeria, it would also cause a further hike in the prices of refined petroleum products.
They noted that if not for the subsidy being incurred currently by the Nigerian National Petroleum Corporation, the price of petrol would have risen to more than N190/litre.
“The rise in crude oil price is good for the country in terms of foreign exchange earnings, but it is also leading to an increase in the cost of refined petroleum products locally,” the National Public Relations Officer, Independent Petroleum Marketers Association of Nigeria, Ukadike Chinedu stated.