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Nigeria: Nigeria’s N12.1trn 2023 Budget Deficit May Widen As Oil Production Shrinks By 58m Barrels in Four Months

Abuja — Nigeria’s already high budget deficit of N12.1 trillion may widen in 2023, following the country’s underproduction of crude oil to the tune of 58 million barrels in the first four months of this year, THISDAY analysis of data from the Nigerian Upstream Petroleum Regulatory Commission (NUPRC) has shown.

While the country has a benchmark oil production of 1.69 million bpd for the year, Nigeria has barely managed to produce 70 per cent of that figure between January and April.

A review of the data indicated that while Nigeria was supposed to produce an average of 202.8 million barrels for the period under consideration, going by the budget projection, but the country was able to drill 144.8 million barrels, leaving a deficit of 57.94 million in the first four months.

With the production benchmark set by the National Assembly, Nigeria is supposed to have an output of 50.7 million barrels every month. However, it has fallen short consistently below that figure this year, even though it’s an improvement on production for most of 2022.

The national assembly had also increased Nigeria’s crude oil benchmark to $75 per barrel from the previous $70 per barrel. At the time , the federal said the country will be able to fund the 2023 budget if Nigeria met the 1.69 bpd benchmark.

But it now appears from data coming out of the industry that that aspiration remains a pipedream.

In all, the country’s output was 39 million barrels in January, 36.5 million barrels in February and 39.3 million barrels in March. April was the most-hit in terms of the volume of oil drilled, with Nigeria only able to produce 29.95 million barrels out of the over 50 million barrels expected cumulative production for the month.

Last week, THISDAY reported that after a period of seeming respite, Nigeria’s crude oil production fell to a seven-month low of 998,602 barrels per day in April, a blow to recent gains made from the renewed efforts by the federal government to tackle oil theft and pipeline vandalism in the Niger Delta.

But the depleted production figure last month was partly connected with the shutting down of oil platforms and declaration of force majeure by Exxon Mobil in Nigeria mid last month, especially at the Qua Iboe asset.

The decision to declare force majeure followed an industrial action by the company’s in-house workers union, the company said in a statement in April. The NUPRC data revealed that the last time Nigeria had production less than 1 million was in August last year when it produced 972,394 barrels per day.

On January 3, President Muhammadu Buhari signed the N21.83 trillion 2023 Appropriation Bill into law, the largest in Nigeria’s budget in history. It was based on a N10.49 trillion revenue, N12.1 trillion deficit and N6.31 trillion estimate for debt servicing.

From the total revenue of N10.49 trillion, independent revenue had the highest share of N2.62 trillion, non-oil revenue had N2.43 trillion, while N2.23 trillion was expected from oil revenue.

The key assumptions included an oil price benchmark of $75 per barrel; exchange rate at N435.57 per dollar; oil production of 1.69 million barrels per day and inflation rate of 17.16 per cent.

Many experts, including the Chief Executive Officer of Cowry Asset Management, Mr. Johnson Chukwu, had recently expressed dissatisfaction over the budget deficit figure.

According to him, the 2023 budget was about 4.3 per cent deficit of Nigeria’s Gross Domestic Product (GDP), adding that such budget deficit may plunge Nigeria into huge borrowing capable of creating economic setback for the country.

Chukwu who spoke on ‘The Morning Show’ on ARISE NEWS Channels, the broadcast arm of THISDAY Newspapers, said the implications of the N12.1 trillion budget deficit in is that it would compel Nigeria to continue to borrow and increase her debt profile.

The latest industry data further showed that Qua Iboe was massively negatively impacted in April, with production slumping from 4.2 million barrels in March to 1.9 million barrels. In Bonny terminal, production also fell from 3.2 million barrels total production in March to 2.2 million barrels in April.

Forcados also witnessed a fall from 5.7 million in March 2023 to 4.8 million last month, while Escravos reduced from 4.3 million barrels to 3.8 million barrels.

Data from the Organisation of Petroleum Exporting Countries (OPEC), in May showed that Angola overtook Nigeria to emerge top African crude oil producer for the month of April.

According to the April 2023 Monthly Oil Market Report (MOMR) published by the oil cartel, Angola recorded 1.06 million barrels per day (bpd) of crude production in April, up from 972,000 bpd recorded in March. However, Nigeria recorded an output of 999,000 bpd in April compared to 1.3 million bpd the previous month.

Aside other several challenges like the workers’ strike in April, Nigeria has had to battle the menace of oil theft and pipeline vandalism as well as waning investment in the oil sector.

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