Despite the huge N500 billion mark up on the Federal Government’s expenditure outlay in the 2018 Appropriation Bill as passed by the National Assembly earlier this week, the government is still going to hit budget surplus at end of the fiscal year as the price of oil shot up to $80 per barrel on Thursday, the highest since November 2014.
Estimated surplus coming with this new oil price is about $58.63 million per day.
The rise in price recently may have necessitated the National Assembly to peg the 2018 budget crude oil benchmark price at $51 per barrel instead of the initial $45 per barrel submitted by President Muhammadu Buhari.
With this development, Nigeria’s Excess Crude Account is expected to further swell above the current amount of $1.88 billion as at yesterday, if the current price is sustained despite the estimated shortfall of 277,000 barrels per day (bpd) in its current output level put at about 2.022 million barrels per day (mbpd) in March, as against the 2.3 mbpd benchmark for budget 2018.
The bullish oil price is attributed to the recent crises in the Middle East over relocation of United States’ Embassy in Israel from Tel Aviv to Jerusalem, though oil prices have been in upswing earlier due to concerns that Iranian exports could fall because of renewed United States sanctions reducing supply in an already tightening market.
Brent crude futures reached $80.18 a barrel yesterday, while the U.S. West Texas Intermediate (WTI) crude futures hit $72.30 a barrel.
U.S. President Donald Trump’s decision, earlier this month to withdraw from an international nuclear deal with Iran and revive sanctions that could limit crude exports from the Organisation of Petroleum Exporting Countries, OPEC’s third-largest producer has boosted oil prices.
France’s Total had warned that it might abandon a multibillion-dollar gas project in Iran if it could not secure a waiver from U.S. sanctions, casting further doubt on European-led efforts to salvage the nuclear deal.
Meanwhile, OPEC said it is not in a rush to start winding down the production cuts despite oil prices continuing their strong rally. The cartel sees the price spike as only a short-term rally driven by geo-political concerns rather than the fundamentals of a much tighter oil market, OPEC delegates and sources said. Saudi Arabia, OPEC’s largest producer and de facto leader, views the temporary speculator-driven oil price rally as not enough to start raising production, according to an OPEC source familiar with Riyadh’s thinking. Supply and demand data need to point to an impact on supply in order for OPEC to make a decision to start winding down the cuts, the source said.