Still basking in the euphoria of an unprecedented improvement in its oil production last week, the federal government has been tipped to record a 20 percent rise in its total oil receipts at the end of the year.
Last week, total production rose to 2.7 million barrels a day from 2.4 million barrels, a development which the Group Managing Director of the Nigerian National Petroleum Corporation (NNPC) Andrew Yakubu said was brought about by the restoration of peace in the Niger Delta.
Managing Director, Financial Derivatives Limited, Mr. Bismarck Rewane, said a combination of the present impressive production data, coupled with the likely passage of the Petroleum Industry Bill will increase Nigeria’s oil revenue by 20 percent at the end of the year.
“We believe the outlook for Nigeria’s crude oil production is positive. The combined effect of the relative peace in the Niger Delta region and the likely passage of the PIB will result in an increase in oil production, above the current trend of 2.1mbpd on average, in the short run. We forecast an average production of 2.45mbpd for the rest of the year. The impact of this will be an increase in oil revenue by 20%, an accretion in external reserves to $42.5 billion, and a reduction in fiscal deficit to an estimate of 2.5%. The overall impact will be a sharp appreciation in the naira to N152-153/$1.”
Rewane’s presentation contained in the latest edition of the FDC Economic Bulletin released at the weekend, put the expected government’s revenue for the month of September at N906.9 billion.
“Using our regression model, at a monthly average production level of 2.4mbpd (65% likelihood based on current trends), we estimate a 6.06% increase in government revenue to N906.9 billion in September, a 4.56% increase in forex inflows to $3.85 billion and an accretion in Nigeria’s external reserves to $45 billion-covering nine months of imports.
“At an average production level of 2.7mbpd (a 35% likelihood), we estimate a 10.7% increase in government revenue to N946.97 billion, a 9.12% rise in forex inflows to $4.02 billion and reserves accretion to $60 billion-covering over 10months of import cover.”
Rewane said the CBN may allow the naira to appreciate sharply to N145/$1, to compensate for the substantial increase in oil revenue.
Oil receipts, a function of oil price and productions, account for approximately 80% of government revenue.
Experts believe that government revenue is more sensitive to oil production than oil prices. Increased oil production will therefore have greater impact on the government’s finances and the attainment of its fiscal and monetary goals. The Federal Government’s 2012 budget is benchmarked to an oil production of 2.4mbpd as against the new record production of 2.7mbpd. The latest figure of 2.7mbpd represents an increase of 28.57% from the year-to-date average of 2.11mbpd.