Receipts from Nigeria’s Excess Crude Oil Export Falls $24 Per Barrel in One Year

Emmanuel Addeh in Abuja

Whereas Nigeria earned an extra $30 for every barrel of crude oil export in comparison to its budgeted benchmark in 2022, the receipt from the surplus in the international price of oil slumped to $6 in 2023, a THISDAY analysis has shown.

A peek into the proposed 2024 budget details as well as the breakdown earlier released by the federal government indicated that in 2022 while Nigeria’s oil price benchmark was $73, the actual average price sold per barrel was $103.87, that is roughly $30 surplus.

On the other hand, this year, whereas Nigeria pegged its oil price benchmark at $75, the excess revenue it received per barrel sold has been a paltry $6, that is, given an oil price of $81.22 for the year so far.

Nigeria operates the Excess Crude Account (ECA), which is a fiscal account that was created to save revenues in excess of the budgetary benchmark price generated from the sale of oil.

The ECA was established in 2004 to help stabilise the country’s economy and smooth out the impact of price volatility in oil exports and is funded by the difference between the market price of crude oil and the budgeted price of crude oil as contained in the government’s appropriation bill.

Despite its good intentions, it is believed that the ECA has been riddled with controversy, allegations of corruption, and uncertain performance even when the funds were available in the account.

As at August this year, the National Economic Council (NEC) revealed that the nation’s excess crude account stood at $473k as against $2.1 billion it had at some point after its establishment under the Olusegun Obasanjo government.

However, the budget breakdown further stated that in 2022, Nigeria’s  oil production was projected to be 1.6+ million bpd, but actual output later turned out to be 1.28+ million bpd, while oil production was 1.33 million bpd as against 1.69 million bpd projection for 2023.

Furthermore, the exchange rate was N435.57 in the 2023 budget, but fell to N601.02 per dollar actual for the year 2023, according to the figures, due to the massive devaluation of the naira. Compared with 2022, it was an exchange rate of N410 and N402 to the US dollar as budget and actual respectively.

According to the document, gross oil and gas revenue was projected at N9.37 trillion for FY 2022, but actual receipts totalled N6.54 trillion, representing 69.8 per cent performance.

But after all deductions, including 13 per cent derivation, the net oil and gas revenue inflow to the Federation Account was N1.61 trillion, which was N2.93 trillion or 64.6 per cent short of the projection.

“Lower-than-budget oil production volume, as well as cost overruns, accounted for the poor performance of oil and gas revenue,” the report said.

In addition, petrol subsidy cost in 2022 was put at N4.105 trillion by federal government, as against the provision of N4 trillion in the approved fiscal framework.

However, while oil revenues were dropping, the non-oil revenue outperformed the budget, representing a performance of 108.9 per cent, the report stressed.

Also, the gross oil and gas revenue for FY 2023 was projected at N9.38 trillion, but as of September, 2023, only N5.58 trillion was realised as against the prorated estimate of N7.04 trillion, representing about 79.3 per cent performance, the estimates showed.

After accounting for deductions, including 13 per cent derivation, the federal government said that net oil and gas revenue inflows to the Federation Account amounted to only N2.93 trillion, which it said was N530.29 billion or 20.7 per cent less than the target.

The international oil market described as very volatile, reacts massively to occurrences globally. It has recently been impacted by the COVID 19 pandemic, the Russian-Ukraine war as well as the inability of Nigeria and other African countries to meet their production targets.

According to the figures in the proposed budget, the federal government’s share of oil revenues was put at N1.42 billion this year, which it put at 84.7 per cent performance, while non-oil tax revenues totalled N2.50 trillion, a performance of 135 per cent

“Crude oil forecasts are based on available information on approved work plans. Crude oil forecast assumes that all evacuation lines will be operational as the security situation is expected to improve.

“The draft 2024 budget has been prepared against the backdrop of continuing global and domestic challenges.

“Overall, fiscal risks have increased, following weaker-than-expected domestic economic performance and structural issues in the domestic economy. Revenue generation remains the major fiscal constraint to Nigeria’s fiscal viability,” the document added.

It’s unclear how long the current falling oil prices will last, but it will be double jeopardy if Nigeria fails to meet both its Organisation of Petroleum Exporting Countries (OPEC) production quota and its benchmark oil price simultaneously.

In the last one week, oil price has fallen by as much as 7.49 per cent or by roughly $6 from the $80.86 per barrel it sold the previous week to $74 for Nigeria’s Brent. However, it had risen to $76 per barrel for Brent as at Monday morning.