Nigeria’s 2015 budget is set for another review as crude oil prices continue its cascade down the pit.
Crude oil prices struck fresh five-year lows in Asia Tuesday, with analysts forecasting further falls owing to weak demand, a global supply glut and fewer production halts.
US benchmark West Texas Intermediate for January delivery fell 52 cents to $62.53 while Brent for January eased 69 cents to $65.50 in afternoon trade, nearer the Nigerian budget benchmark of $65.
WTI tumbled $2.79 in New York to hit its lowest closing point since late July 2009, while Brent tanked $2.88 in London to its lowest close since September 2009.
Nigeria has changed its benchmark twice in the last few weeks, from $78 to $73 and lately to $65. Analysts suggest a more realistic benchmark of $50, with prevailing forecasts that oil prices will continue to fall.
Nigeria depends on oil revenue to bankroll its big recurrent expenditure, with its parliamentarians said to be the highest paid in the world.
Oil revenue accounts for more than 75 per cent of government revenue. And Nigeria projects to spend N4.66 trillion next year, under a revised budget. Okonjo-Iweala, will need to slash this further, analysts said.
“An extended period of lower oil prices should be positive for the global economy as a whole, including key emerging economies led by China and India,” said research house Capital Economics in a commentary.
“However, we also see scope for renewed worries about the impact on the big losers, including geopolitically important economies like Russia, and on the oil industry itself,” it added.
The London-based firm said prices were likely to face “additional downward pressure” next year due to a projected reduction in global supply outages, the possible return of Iranian exports currently disrupted by sanctions, as well as a strengthening dollar.