Nigeria?s 2009 budget may suffer a setback owing to the global financial meltdown, which is pushing down the world oil prices.
Oil prices dropped to about $83 last week after rising as high as $140 a barrel a few weeks ago. Nigeria?s 2009 budget was benchmarked on $62 per barrel, thus giving the country enough excess crude fund to play about with.
Central Bank of Nigeria Governor, Professor Chukwuma Soludo who spoke to journalists at the weekend during the ongoing World Bank/ IMF Annual Meetings, said that oil prices had dropped by about 40 per cent within a fortnight and might drop further if the crisis persisted. This, he said, would affect Nigeria?s financial projections for next year.
?What is proposed for 2009 budget is $62 and the price as at Friday was $83. So the chances are that by the time we go into implementation of the budget, the price may even hit below the benchmark, in which case there will be no excess crude even to augment the budget we are talking about, especially in the light of the Niger Delta crisis,? he said.
According to Soludo, Nigeria?s excess crude account, which usually supplements the budget, has already been wiped off by regular recourse to it by the three tiers of government.
?You know because of the fall in production quantities, the amount shared is always less than the budget. So you take money from the excess crude to augment to make it to the budgeted amount to be shared on a monthly basis. These are all drains to the excess crude account that we are talking about,? he said.
The governor said it needed to be underscored that ?there is no excess crude fund for now. Much of it is gone with this integrated power project.?
?They have agreed I think to spend about $5.6 billion on power and if the formula that was agreed before that at the end of each year they will share 80 per cent of what had accrued and save 20 per cent. That is the subsisting agreement,? he said.
The three tiers of government, he said, agreed to a N1 trillion baseline for excess crude savings. That means that they would share 80 per cent of any amount earned in excess of that threshold and plough back 20 per cent.
The governor, however, expressed fears that with the current global crisis and the likely negative impact on oil prices, these targets might not be sustainable.
Already, international oil analysts have expressed similar concerns, Goldman Sachs Group Inc. has reduced its oil price estimates.
The Group reduced its estimate for the U.S. benchmark West Texas Intermediate crude for the fourth quarter to $75 a barrel from $110, and cut its year-end target to $70 a barrel from $115.
``We clearly underestimated the depth and duration of the global financial crisis and its implications on economic growth and commodity demand,'' the analysts wrote in the report.
Goldman lowered their forecasts for 2009 with the average for the year reduced to $86 a barrel from $123.