14 December 2014, Abuja –In what may be a sign of bad times ahead for the Nigerian economy in 2015, oil price fell farther below the $65 per barrel benchmark adopted for oil revenue on Thursday.While the OPEC Basket price dropped to $61.35pb (down by $3.65), Brent crude fell to $64.17 (a decline of $0.83 as at 14:34:59 GMT) below the benchmark price adopted by the Federal Government for the 2015 budget.
Oil production has fallen short of the government’s target of 2.4 million barrels a day every month this year, according to data compiled by Bloomberg.
Also on Thursday in Abuja, Director-General, Bureau of Public Enterprises (BPE), Benjamin Ezra Dikki, said the nation needs $113 billion investment to fix infrastructure in three critical sectors of the economy. They include oil and gas, power, roads and rail sectors over the coming six years
In presentation at the Annual General Meeting of Manufacturers Association of Nigeria (MAN), he said Nigeria needs between $18 and $20 billion investments in the power sector.
Speaking on: “Making Nigeria Work–A Dialogue Between the Real Sector and the Reformer,” Dikki added that during the period, “Nigeria will require about $60 billion investments in oil and gas to unleash the potential in the sector.”
A statement by Chigbo Anichebe, BPE’s spokesman in Abuja, also quoted Dikki as saying Nigeria also needs $33 billion to modernise the transport system within the six years for rehabilitation and modernisation of the Nigerian railway and the construction of new road networks nationwide.
He, therefore, urged private sector participants to invest in these critical sectors, and that “to attract these needed private sector investments the government through the transformation agenda is fine- tuning policies and legal and regulatory frameworks to give confidence to the private sector to invest.
“The enactment of the Petroleum Industry Bill (PIB) and transport bills midwifed by BPE will be critical,” he said.
Going by current estimates, Dikki also said the Federal Government loses additional $287 million monthly to its failure to pass the Petroleum Industry Bill (PIB), now gathering dust on the shelves of the National Assembly.
The figure, he said, is estimated loss in additional revenue accruals to government from the three Production Sharing Contracts.
He said the BPE had concluded reforms in eight sectors of the economy namely, telecommunications, power, banking and finance, marine, mining, industrial, steel, and oil and gas.
The BPE boss said government was not in a position to finance all the investment requirements, thus the private sector needs to participate in investing in the various sectors.
He said it was in a bid to attract the needed private sector investments that the government through the transformation agenda was fine-tuning policies and legal and regulatory frameworks to give confidence to the private sector to invest.
The government, he continued, has so far privatised 123 enterprises including the recently concluded sale of Power Holding Company of Nigeria successor companies that yielded over N564.3 billion.
Morgan Stanley, on Monday, in a new report published on December 5, 2013, said crude oil benchmark could fall as low as $43 a barrel in the second quarter of 2015.
Based on this, the company slashed its 2015 base case forecast for Brent to $US70 from $US98 a barrel and for 2016 to $US88 from $US102 a barrel, as Brent crude for January delivery fell to $US67.73/barrel, near last week’s trough of $US67.53 which was its weakest since October 2009.
The report added that “without OPEC intervention, markets risk becoming unbalanced, with peak oversupply likely in the second quarter of 2015.”
“With OPEC on the sidelines, oil prices face their greatest threat since 2009, but we expect a volatile 2015 rather than a one-way trade,” it added.
In the report, Morgan Stanley analyst, Adam Longson, was quoted as saying: “Without OPEC intervention, markets risk becoming unbalanced, with peak oversupply likely in the second quarter of 2015.”
“Given continued oversupply and still no sign yet that U.S. oil production starts to show any reaction, perhaps prices will continue to head lower,” said Carsten Fritsch, senior oil and commodities analyst at Commerzbank in Frankfurt.
*Kingsley Ighomwenghian – Daily Independent