The sustained fall in global benchmark crude, which has continued to trade below Nigeria’s oil price benchmark for this year’s budget in recent days, has wiped off any accretion to the country’s Excess Crude Account.
Economic experts told our correspondent on Friday that the further decline in oil prices had raised the prospect of another devaluation of the naira.
On August 3, Brent crude, against which Nigeria’s oil is priced, plunged below the $50 per barrel mark, for the first time in six months. It fell to $48.87 per barrel on Friday.
The steep decline in oil prices had in March forced the National Assembly to settle for $53 per barrel as the oil benchmark price for 2015 budget, down from $65 proposed by the Executive, which had to adjust it twice, from $78 to $73, and later to $65.
Oil prices have recently shown signs of stabilising, with Brent trading at $68 per barrel in May, after losing about 60 per cent of its value between June 2014 and January this year. It reached a peak of $115 per barrel in June last year.
The Global Chief Economist, Renaissance Capital, Mr. Charles Robertson, said, “The lower oil price is going to be painful for the budget. It means less money is available for much-needed investment in infrastructure.”
One way to mitigate this would be by letting the currency to depreciate – as Russia had done, Robertson told our correspondent in an emailed response to questions on Friday
The naira has fallen by about 22 per cent against the United States dollar in the past year as the Central Bank of Nigeria was forced to devalue the currency in November 2014 and February this year.
The CBN will have to devalue the naira at some stage, possibly by more than 15 per cent, a global ratings agency, Standard & Poor’s, said last month.
