Should oil prices continue to dip, funding next year’s N8.73 trillion budget may be tough for the Federal Government.
Brent declined 2.01 per cent to $58.41 a barrel yesterday on the back of global equity sell-offs and continued concerns that the Organisation of Petroleum Exporting Countries (OPEC)/non-OPEC cuts may not be enough to re-balance an oversupplied market
But a source within the Presidency said there was nothing to worry over the slide, saying it was marginal.
“We will still retain the benchmark at $60 per barrel because industry experts have said the oil price fluctuations are temporary. There is no cause for alarm at all,” the source told The Nation last night, pleading for anonymity.
The plunge was amid fears of slowing global economic growth.
Oil price was down 51 cents (or nearly one per cent), at $59.77 per barrel after it earlier rose as high as $61.21 on Monday.
WTI Crude was down below the $50 handle, having dropped 2.27 per cent to $49.00.
The N8.73 trillion 2019 Budget proposal, billed for presentation today by President Muhammadu Buhari to the joint session of the National Assembly, was prepared on an oil price benchmark of $60 per barrel.
The government is proposing $56.5 per barrel for 2020 and $56.5 for 2021. Oil production is estimated at 2.3 million barrels per day (mbpd), 2.44 mbpd and 2.62 mbpd for 2019, 2020 and 2021.
The exchange rate is projected at N305 to $1 for the three years, while inflation remained almost constant at 9.98 for 2019, 9.43 for 2020 and 9.58 for 2021 as against 11.78 for 2018.
The oil benchmark for this year’s budget was initially put at $45 but later raised to $51 per barrel by the National Assembly.
Crude oil production was bench-marked at 2.3 million pbpd and exchange rate of N305 to one dollar.
The oil Gross Domestic Product (GDP) for the same period was projected at N11,163.5 billion, N10,769.3 billion and N10,183.4 billion and the non-oil GDP for the next three years (2019, 2020 and 2021) was projected at N128,489.3 billion, N143,921.2 billion and N161,017 billion.
The total GDP for the period under review was put at N139, 652.7 billion, N154, 690.6 billion and N171,200.5 billion with the GDP growth rate at 3.0 for 2019, 3.6 (2020) and 3.9 (2012).
Energy sector analysts say the continued slide in oil prices portends grave dangers to the implementation of next year’s budget.
“Though about N400 billion lower than that of the outgoing year, the slide will surely take a toll on the budget because the nation relies heavily on oil earnings for its foreign exchange,” an analyst said.