Nigeria's 2019 budget delivery faces challenges after crude oil prices drop to $48 a barrel

NIGERIA'S 2019 budget delivery is at risk of not being delivered after global crude oil prices fell to a low of $48 a barrel some $12 below the benchmark price of $60 upon which government expenditure is predicated.

Earlier this month, President Muhammadu Buhari presented the 2019 budget to a joint session of the National Assembly. Worth a total of $28.8bn, the budget was based on Nigeria selling 2.3m barrels of oil at an average price of $60 a barrel, with about $9.5bn set aside to fund capital projects.

These plans could now be in jeopardy as yesterday, the price of Brent Crude, which sells at the same price as Nigeria's Light Bonny Crude fell to $48 from $50 a barrel. This means that the government projections, especially total revenue projection and expenditure in the budget may not be realised, should the volatility continue in the market.

In his budget presentation, President Buhari said: “As a responsible administration, we will continue to monitor the situation and will respond to any changes in the international oil price outlook for 2019. The 2019 budget proposal is intended to further place the economy on the path of inclusive, diversified and sustainable growth in order to continue to lift significant numbers of our citizens out of poverty.

“The underlying drivers of the 2019 revenue projections have been adjusted to reflect current realities. On the expenditure side, allocations to ministries, departments and agencies of government were guided by the three objectives of restoring and sustaining growth, investing in our people and building a globally competitive economy."

Notwithstanding the recent softening in international oil prices, the considered view of most reputable analysts is that the downward trend in oil prices in recent months is not necessarily reflective of the outlook for 2019. President Buhari has already directed the Nigerian National Petroleum Company to take all possible measures to achieve the targeted oil production of 2.3m barrels per day.