Oil Price and 2016 Budget Benchmark

Oil & Gas
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Tuesday, January 05, 2015 05:22 PM / TheAnalyst


The plunge in oil price at the international market has been a major challenge for Oil-exporting countries which Nigeria is one with majority struggling with a budget that won’t balance.


Budget surpluses are spinning into deficits and affected countries are replacing welfare and social programs with austerity and cuts. Oil price which traded above $100 in mid-2014 traded far below that price in 2015.


In 2015, oil traded at an average high of $62 in May while towards the end of the year it traded below the $53 oil benchmark set for 2015 budget. This remains a challenge as oil accounts for about 75% of Nigeria's government revenue and virtually 90% of its exports.


In the 2016 budget, with the dwindling oil price in mind, government set oil benchmark at $38, a step some economic experts described as good as revenue from oil will be used to finance the budget implemention while the deficit is expected to be sourced via tax and borrowing.


Recently, OPEC has predicted more inventories in oil market and this will surely worsen market situation as the market is already suffering glut. Other countries which are worst hit include Venezuela, Saudi Arabia, Russia, Algeria, Iran, UAE and Iraq among others.

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