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Nigeria’s 2019 budget benchmark is predicated on $60 per barrel, though as of the time the budget was been prepared, crude oil price hovered around $50. It drew criticism and was considered unrealistic.
“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 had stated in his budget address while justifying the crude oil budget benchmark.
The country’s 2019 budget tilt more on crude oil revenue projected at N3.73tn. With the non-oil revenue estimated at N1.39tn, this leaves the economy vulnerable to oil price volatility and poses a major budget risk.
Another major shortcoming of the budget is the plan to borrow N1.649tn for the purpose of financing the budget deficit. Thus, with the recurrent spending estimated at N4.72tn, (inclusive of the provision made for the implementation of the new minimum wage), the economy could run into a major hitch should the sudden collapse of oil price in 2014 re-occur.
However, the rising Middle East tension which has boosted crude prices and kept prices above $70 level, at a time escalating trade war between the US and China is keeping oil prices subdued, is lending a helping hand to Nigeria’s budget challenges.
“Given that nearly one-third of global oil production and nearly all of global spare capacity are in the Middle East, the oil market is very sensitive to any attacks on oil infrastructure in this region,” Swiss bank UBS said.
The attacks took place against a backdrop of US-Iranian tension over Iranian nuclear capabilities, its missile program and its support for proxies in Yemen, Iraq, Syria and Lebanon.
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