•Brace for more borrowing, experts warn
By Adewale Sanyaolu
By Adewale Sanyaolu
Oil and gas stakeholders, at the weekend, expressed concerns and skepticism over the federal government’s proposed $75 per barrel oil price and 2.06 million barrels per day production target, as outlined in the 2025 budget proposal.
Their doubts centre around the feasibility of the projections, given the prevailing market uncertainties and Nigeria’s ongoing crude production challenges.
The Federal Executive Council (FEC), last Thursday, proposed a national budget of N47.9 trillion for the 2025 fiscal year.
The Minister of Budget and National Planning, Atiku Bagudu, who made the disclosure said the budget is part of the Medium-Term Expenditure Framework (MTEF) for 2025 to 2027 and in line with the Fiscal Responsibility Act of 2007.
FEC pegged the price of crude oil at $75 per barrel and proposed N1,400 as exchange rate to a dollar with oil production put at 2.06 million barrels per day.
Reacting to the 2025 budget projections, Lead Partner, Centre for Energy Studies, Mr. Benjamin Adenugba, worried that a $75 per barrel oil price and 2.06 million barrels of oil daily production were not realistic. He argued that the work plan to grow oil production to two million bpd would not begin until the third quarter of next year. He said those investments that would lead to incremental oil production are just about to begin now, stating that the country is overly ambitious in its projections.
He explained that with the Government’s projection, which is unlikely to happen, Nigeria would be under-producing by 300,000 per day, noting that current oil production is about the OPEC quota, which is in the region of 1.7 million bpd. He added that with an underproduction of 300,000 bpd, that translates to 54 million barrels for the first two quarters of 2025, leading to revenue loss for the country.
Adenugba said such revenue loss would mean increased borrowings for the country, which has already projected N13.8 trillion to finance the budget deficit in 2025. “So, if you cannot fund your budget based on revenue shortfall occasioned by low oil projections, that means your borrowings will increase, thereby putting the budget in dire straits.”
On oil price, he said the Government should have set it at current levels of $70 per barrel as opposed to $75, which he believes is not realistic.
Bagudu said the budget proposal includes new borrowings of N13.8 trillion to finance the budget deficit in 2025.
Also speaking, Chief Executive Officer of Cowry Asset Management Limited, Mr. Johnson Chuwu, said the budget size of N47.9 trillion, premised on 2.06 million bpd and an oil price benchmark of $75 per barrel, appears too ambitious and may run into murky waters. He said both the oil price benchmark and the oil production figure of $75 per barrel and 2.06 million barrels per day aren’t realistic.
He said the election of Donald Trump as the United States President signals a major threat to the oil market. He added that the US, being the largest oil producer in the world, wouldn’t relent and would increase production under Trump, causing a decline in oil prices.
Besides, he said he doubts Nigeria could attain an oil production figure of 2.08 million barrels per day, considering where we are at the moment. In all, he said the country may be confronted with revenue challenges if it fails to hit both its oil price and oil production benchmarks.
He equally faulted the exchange rate projection of N1,400 to $1, saying that at the moment, the current exchange rate at the official exchange window is more than N1,400 to $1, querying how the Government arrived at that figure.
“Once we fail to meet these projections, then we should be ready for more borrowing, which will further put the economy under pressure.” He concluded, “Growing our oil production from the current level to 2.08 million bpd translates to about 30% growth. That is quite ambitious, I must say.”