A Review of the Nigerian Energy Industry

Nigeria proposes $78/b oil price benchmark for 2015 budget

*2015 Oil output target set at 2.278 mb/d

21 October 2014, Lagos – Nigeria is proposing an oil price benchmark of $78/barrel for the purposes of revenue calculations in its 2015 budget, according to a government paper seen Thursday, amid concerns over falling oil prices in the international market.

The 2015 oil price benchmark, which is slightly higher than the $77.50/b price for the current 2014 budget, was contained in the Medium Term Expenditure Framework sent by President Goodluck Jonathan to the national assembly.

CBN corporate HqThe oil production target was set at 2.278 million b/d, lower than the 2.38 million b/d of oil output assumed for 2014, as the government admitted that crude oil theft still posed a major threat to aims to increase oil production.

“Our [oil price] proposal is also driven by the need to be cautious in our revenue projections given the volatile nature of oil prices and the need to rebuild our fiscal buffers, which have been very useful in periods of revenue shocks,” the president said.

“It should be recalled that the country has had painful experiences with regard to crude oil price swings.”

Oil, which has been trading well below $90/b in the international market in recent weeks, accounts for around 80% of Nigerian government revenue. However, large-scale theft of its crude and a reduction in exports following the increase in shale oil production mainly by the US, has posed a major threat to Nigeria meeting its revenue targets.

The US, previously Nigeria’s biggest crude importer, no longer imports crude from the West African country.

Data released Wednesday by Nigeria’s central bank, for instance, showed Nigerian oil output averaged 1.9 million b/d in the second quarter, unchanged from the previous quarter but well below the government’s output target of 2.38 million b/d for 2014.

“Despite the government’s efforts to curb incessant crude oil theft in the Niger Delta region, the menace has continued to dampen crude oil production,” the central bank said.

Nigeria’s gross oil receipts also dropped by 0.7% to Naira 1.79 trillion ($11 billion) during the period, the bank said.

Analysts said a planned increase in spending in 2015, a general election year, may be behind the proposal to raise the oil price benchmark, with expenditures put at N4.817 trillion compared with N4.7 trillion in 2014.

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