Nigeria is proposing an oil price benchmark of $78/barrel for the purposes of revenue calculations in its 2015 budget, amid concerns over falling oil prices in the international market.
The 2015 oil price benchmark, which is slightly higher than the $77.50/b price for the current 2014 budget, was contained in the Medium Term Expenditure Framework sent by President Goodluck Jonathan to the National Assembly. The oil production target was set at 2.278 million b/d, lower than the 2.38 million b/d of oil output assumed for 2014, as the government admitted that crude oil theft still posed a major threat to aims to increase oil production.
The President in the document sent to the National Assembly said, "our [oil price] proposal is also driven by the need to be cautious in our revenue projections given the volatile nature of oil prices and the need to rebuild our fiscal buffers, which have been very useful in periods of revenue shocks". He added that the nation could not afford to throw caution to the wind as it had struggled with crude oil price swings in the past.
Oil, which has been trading well below $90/b in the international market in recent weeks, accounts for around 80% of Nigerian government revenue. However, large-scale theft of its crude and a reduction in exports following the increase in shale oil production mainly by the US, has posed a major threat to Nigeria meeting its revenue targets. Data released Wednesday by Nigeria's central bank, for instance, showed Nigerian oil output averaged 1.9 million b/d in the second quarter, unchanged from the previous quarter but well below the government's output target of 2.38 million b/d for 2014.
The Central Bank of Nigeria noted that, "despite the government's efforts to curb incessant crude oil theft in the Niger Delta region, the menace has continued to dampen crude oil production.” Nigeria's gross oil receipts also dropped by 0.7% to Naira 1.79 trillion ($11 billion) during the period, the bank said.
Analysts said a planned increase in spending in 2015, a general election year, may be behind the proposal to raise the oil price benchmark, with expenditures put at Naira 4.817 trillion compared with Naira 4.7 trillion in 2014.