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2013 Budget benchmark assumption may be a mirage – Analysts

By on October 30, 2012

President Jonathan Presents Budget at the National Assembly

Oil production has dropped significantly from 2.5 million barrels per day (mbpd) to 2.2 mbpd in the first half of this year due to effects of the flood.

According to a weekly report by Afrinvest, the Nigerian National Petroleum Corporation (NNPC) revealed that oil production in the country has fallen from an average of 2.5 mpbd in the first half of this year to between 2.1 and 2.2 mbpd last week due to flood and major outage on a Shell facility.

After the presentation of the 2013 budget by the federal government to the national assembly, local and international analysts doubted the benchmark for crude oil production, saying it was a most doubtful target.

Although the analysts based their doubts on the Niger Delta crisis, which seem to erupt now and then, not flood.

Earlier in reaction to the oil benchmark, after the proposed budget was sent to the National Assembly, the Regional Head of Research, Africa Global Research, Standard Chartered Bank, London, Razia Khan, said the proposed oil production level of 2.53 mbpd for 2013 is too optimistic considering the level attained so far in 2012.

In another development, the CEO of Financial Derivatives Company (FDC) Limited, Bismarck Rewane warned, “Production is currently about 2.16 mbpd and it is not likely to increase if the problems of oil theft and pipeline leakages are not addressed. Besides, revenue would be adversely affected if weakness in the global economy causes disruption in output levels. In that case, the deficit gap is expected to be larger and domestic borrowing would increase.”

Analysts maintain that if the usual assumptions are anything to go by, the budget 2013 assumption may end up being a mirage, now that the threats to the budget have come from flood and not communal crisis.

The situation has left some Nigerians wondering if the budget will pass this test. President Goodluck Jonathan said, “The budget is a plan of the intended revenues and expenditures for a country and a tool for macroeconomic management that could help promote fiscal prudency and foster growth in the economy.”

 

Maybe, the redeeming feature will come from Oando state, which has begun production of about 2,000 barrels per day from the Ebendo-4 well, increasing its total output by 40 percent.

 

Rewane stated in his letter that “in our opinion, it is likely that the proposed 2013 budget may not achieve its fiscal consolidation and growth objectives.”