This, it said, may result to a decline in the federation account allocation to the three tiers of government as well as the budget.
Standard Chartered Bank’s London-based Head of Macroeconomics and Regional Head of Research for Africa, Razia Khan, stated this in a latest report titled: “Nigeria – Politics Takes Centre Stage,” obtained at the weekend.
Indications emerged last week that the Excess Crude Account (ECA) had depleted to $3.18 billion.
The finance ministry estimated the amount of stolen oil to be at about 80,000 barrels per day (bpd), just as a Chatham House report had estimated the trade to be worth $38 billion a year.
The amount of production shut in as a result of oil theft was said to be costing the country close to one-fifth of its output.
However, Khan noted: “With domestic politics dominating in 2014, Nigeria is unlikely to make much progress on tackling oil theft. The passage of the long-awaited Petroleum Industry Bill (PIB), an ambitious plan to reform the upstream and downstream oil sectors, is also uncertain.
“With the PDP’s majority in the National Assembly looking increasingly tenuous, PIB passage is unlikely. Uncertainty over future fiscal terms has exerted a high cost on Nigeria’s oil sector.
“The number of deep-water wells drilled in recent years lags far behind regional peers. Near-term, robust local appetite to buy onshore assets from international oil companies is likely to be constrained by the availability of financing.”
The report pointed out that the power sector reforms would be a key influence on the economic (and possibly the political) outlook.
The first half 2013 gross domestic product (GDP) was negatively affected by supply disruptions from the West African Gas Pipeline, driving power generation to new lows.
The report also stated that power supply might improve meaningfully only in the medium term, adding that agric sector reforms and the focus on the agriculture value chain was expected to have a positive near-term effect on the economy.
“The 2014 budget was not presented in November 2013, the typical timeframe. This was ostensibly because of disagreement over the benchmark oil price. The contentious political backdrop raises the risk that no budget will be passed by end-March 2014 (the deadline for approving the budget).
“In addition, the still-ambitious oil output assumption (2.39mmbd versus 2.53mmbd in 2013) is likely to require further augmentation of budget revenue using ECA proceeds.
“With ECA savings thought to have declined to close to $3.3billion, this raises upside risks to borrowing projections. Given revenue constraints, the capital expenditure budget will be cut according to the Medium Term Expenditure Framework, with the share of recurrent expenditure set to increase to 74 per cent,” it stated.
– Obinna Chima, This Day