The latest economic report released by the Central Bank of Nigeria (CBN) has revealed that Nigeria’s oil revenue declined by N62.2 billion in May 2019. According to the CBN report, the gross revenue realised from oil sales in May 2019 was estimated at N410.18 billion, up from N472.38 billion recorded in the previous month. This means Nigeria’s total oil revenue dropped by 15% in one month.
While explaining the reasons for the decline in Nigeria’s oil revenue in the monthly economic report, Central Bank stated that the decline was attributed to shut-ins and short-downs at some NNPC terminals due to pipeline leakages and maintenance activities.
Revenue drops across sectors: Basically, Nigeria’s revenue source is categorised into oil and non-oil sectors. Over the last one year (between May 2018 – May 2019), the total Federally-collected revenue dropped by 11.4% or N95.2 billion. Basically, the total revenue collected in May 2018 was N829 billion. The figure dropped to N733.8 billion in May 2019.
Further analysis of the CBN report shows that oil revenue dropped by 11% or N21.2 billion within the year, while non-oil revenue dips at a high N74 billion or 18% in the last one year.
According to the Central Bank’s report, Non-oil revenue was estimated at N323.64 billion or 44.1% of the total revenue. This is below the provisional monthly budget estimate of N466.91 billion by 30.7%. It, however, exceeded the preceding month’s receipt of N322.93 billion.
The Central Bank stated that the lower non-oil revenue relative to the provisional monthly budget was due to the shortfalls in receipts from all the non-oil revenue components, except Customs and Excise Duties.
Oil price gained: The average spot price of Nigeria’s reference crude oil, the
Bonny Light (37° API) rose to US$73.70 per barrel in the review period. According to the Central Bank, the rise in crude oil price was due, largely, to the growing tensions across the MiddleEast, which threatened crude oil supply.
The Bank also stated that the escalating trade war between the U.S. and China, supply losses from Venezuela, Libya and Iran, as well as, compliance with supply-cut pact by most OPEC member countries have enabled oil prices to gain momentum to be told at a higher price. Despite the rise in oil prices, Nigeria’s revenue has suffered a blow.
A decline in revenue allocation: Following the reduction in revenue generated from oil in the month of May, the revenue allocated to the three tiers of governments also inched down. According to the Central Bank’s report, the total allocation to the three tiers of government in May 2019 amounted to N594.62 billion. This was below the provisional monthly budget estimate of N923.39 billion by 36.4% and below the preceding month’s allocation of N602.41 billion, by 1.3%.
The Central Bank provided details of the breakdown of allocation as follows:
- Out of the total N667.29 billion retained revenue in the Federation Account, the sums of N92.63 billion, N48.76 billion and N24.73 billion were transferred to the VAT Pool Account, the Federal Government Independent revenue and Others, respectively.
- the Federal Government received N239.65 billion, while the state and local governments received N121.56 billion and N93.71 billion, respectively. The balance of N46.26 billion was shared among the oil-producing states as 13% Derivation Fund.
- Similarly, from the N92.63 billion transferred to the VAT Pool Account, the Federal Government received N13.89 billion, while the state and local governments received N46.31 billion and N32.42 billion, respectively.
- In addition, the sum of N0.81 billion was distributed in the month as exchange gain with the Federal, state and local governments receiving N0.39 billion, N0.19 billion and N0.14 billion, respectively, while the 13% Derivation Fund received N0.10 billion.
Oil production on the low: While revenue has dropped, the number of barrels produced and exported have also declined in the past month.
- Nigeria’s crude oil production (condensates and natural gas liquids) was 1.82 million barrels (mb) per day or 56.4 million barrels (mb) in the review month. This represented a decline of 0.01 mbd or 5.2%, compared to 1.92 mbd or 57.6 million barrels (mb) produced in the preceding month.
- Also, Crude oil export was 1.37 mbd or 42.5 mb, representing a decline of 6.8%,
compared with 1.47 mbd or 44.1 mb recorded in the preceding month.
Debt stock may rise: As the total federally-collected revenue dips, with estimation showing that figures are below the monthly budgets, this may open another window of borrowing for the country’s already huge debts stock.
The Central Banks rightly stated that Nigeria’s oil revenue in May 2019 was largely below the monthly budget of N640.21 billion, which means that budget implementation has suffered yet another deficit of N230.03 billion.
On the sideline, States government may face another uphill task as the declining oil revenue is already depleting statutory allocation to the states government.