A Review of the Nigerian Energy Industry

Nigerian law makers worry over falling oil prices

4 October 2011, Sweetcrude, Abuja – The Nigerian House of Representatives has raised concerns over falling crude oil prices and the funding challenges it could cause the nation’s 2012 budget.
The price of a barrel of West Texas Intermediate Crude dropped to $77.61 on Monday, the lowest since September 28, 2010, while Brent Crude traded at $101.71 per barrel; its weakest since February 21, 2011.
Analysts have said that demand for oil may further drop, indicating a possible future drop in prices.
This is coming at a time when the Federal Government had predicated the 2012 budget on a benchmark oil price of $75 as against $65 set for the 2011 budget.
In reaction to the development, the House advised the Ministry of Finance to assess the situation properly before pegging the 2012 budget benchmark.
The Chairman, House Committee on Appropriation, Mr. John Enoh, observed that the price dip was not healthy, “not even for the 2011 budget, which we are still implementing.”
He said, “We still have three months to go in the current fiscal year; the 2011 benchmark is $65.
“So, if you match this with what the state governors are saying about the Sovereign Wealth Fund, you will know that there will be challenges. However, we hope that the situation does not get worse than this.”
Enoh hinted that the House might not be able to take a definite position on the oil price dip until the situation was monitored for “at least the next one month.”
Also, the Chairman, House Committee on Petroleum Resources (Upstream), Mr. Muraina Ajibola, advised the Executive to approach the budget cautiously since the country had no control over oil prices.
“Oil prices are decided by forces of demand and supply and other reasons that shape the market globally,” he noted.
Ajibola added that much as there was anxiety over the price dip, there was little the House could do until the Executive had laid its 2012 proposals before the legislature.
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