Subpar Budget Revenues From Oil

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Wednesday, January 30, 2019   11:31 AM / FBNQuest Research

                                                                                  

Federally-collected revenues continue to run behind budget, according to data in the CBN’s monthly reports. For the 13 months through to October, total oil collections (gross), as with the non-oil equivalent, did not once reach the pro rata budget figure of N640bn: the closest they came was N514bn in July. The take from domestic sales hit the target each month, but that from petroleum profits tax (PPT) and royalties not once. After statutory deductions, these revenues are transferred to the federation account for distribution to the three tiers.    

The 2018 budget, signed off by the president in June, assumed average oil production of 2.30mbpd and an average price of US$51/b. In the period covered by the chart, output did not once reach the assumed level and the average price did not once fall below the threshold. This remains the case through to today. 

Nigerian budgets tend to follow the pattern of too high a production assumption and a conservative price threshold. Despite this familiar trade-off, however, total oil revenues have been consistently well below target according to the CBN data series. 

Earlier this month, Emmanuel Kachikwu, the minister of state for petroleum resources, estimated output at the time of 1.78mbpd in crude oil and a further 350,000 b/d in condensates. This would reflect the start of commercial operations in Total’s Egina field in December, and also allow Nigeria relative flexibility in the context of the new production quotas set by OPEC after the latest agreement on restraint with Russia and other allies. 

 

Federally-collected oil revenues (gross; N bn)

 

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Sources: CBN; FBNQuest Capital Research

 

The 2019 budget proposals, which may not see the light of day or which at the minimum will be adjusted after the elections, have output again at 2.30mbpd (overly optimistic) and the average price at USD$60/b (not that conservative and indicating modest headroom in the context of our forecasts).

 

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