A new threat looms over Nigeria’s 2009 budget as oil sold on the international market at below $57 per barrel (pb) on Wednesday, the lowest in 20 months, with a hint that it could dip even further.
Nigeria, one of the biggest producers in the world, has already been forced to trim down its benchmark price of oil for the budget from $62.5 pb to $45 pb.
Light, sweet crude for December delivery, was down $2.49 at $56.85 pb on the New York Mercantile Exchange. Oil prices have plunged more than 60 per cent in four months, falling from a record $147.27 in July.
It sold for below $60 pb on Tuesday, throwing up a fresh conflict between Aso Rock and Governors over the $45 benchmark in the budget.
The Governors at a forum on Monday unanimously disagreed with the Presidency over the new benchmark, which they said “is too low,” and demanded that it be jerked up to $50.
Although Aso Rock has maintained a hard line on the issue, a source said on Tuesday that the decreasing oil prices has “strengthened its stand and this may bring about a major disagreement between it and the Governors.”
Governors’ Forum Chairman, Governor Bukola Saraki of Kwara State, told reporters after the meeting in Abuja that he and his colleagues “have resolved to canvass this position at the National Economic Council (NEC) meeting.”
Another source said Nigeria would request another cut in supply when the Organisation of Petroleum Exporting Countries (OPEC) meet on December 17, “if the trend continues, at least to save the country’s economy and particularly our budget.”
Analysts have repeated their call on the government to broaden its sources of revenue.
Ibilola Amao, an oil and gas design engineer, argued that the continuous decline in oil price makes it imperative for the government to diversify its sources of revenue.
It is against this backdrop a meeting will be held in Washington this weekend by The Group of 20 leaders (G20) who represent the world’s major industrialised nations and developing ones, including Nigeria, to discuss measures to restore global financial stability.
Europe has taken the lead in pushing for the summit and coming up with solutions.
When the economic crisis struck Europe, two political powerhouses stood out in their attempt to soften the blows – British Prime Minister, Gordon Brown, and French President, Nicolas Sarkozy.
France currently chairs the European Union (EU), and Sarkozy was quick to call for a transatlantic solution to the crisis.