Nigeria seems to be falling into a deeper revenue mess as the price of the country’s headline crude, Bonny light fell below the prices of Brent crude and US headline WTI crude.
Bonny Light is a Nigerian crude produced in the Niger Delta and named after the city of Bonny where it is largely sourced from. The oil has low sulfur content by world standards, so it is in high demand for its low corrosive effects on refinery infrastructure and the low environmental impact of its byproducts. The sulfur content ranges between 0.14% and 0.16%.
The Bonny Light price is more often than not correlated with the Price of Brent and typically trades above Brent.
Available information from Oilprice.com disclosed that the Nigerian Bonny light sold for $16.46 per barrel as at 11.56 pm on April 25, 2020, as against the Brent crude which sold for $21.44 per barrel and the WTI crude which sold for $16.94 per barrel within the same period.
It could be recalled that the American WTI, in a historic outcome, sold at a negative price that is below zero dollars per barrel for the first time ever a few days ago. It means that the oil traders were willing to pay to get the crude oil off their hands ahead of the expiry of the contract for delivery in May.
READ MORE: Many odds against the naira
However, the price of WTI has rebounded since then.
The crude oil prices have been on a downward trend due to the global economic crisis caused by the impact of coronavirus pandemic and global lockdown of businesses and households.
Nigeria appears to be in the worst fiscal crisis it has been in for decades as the country’s revenue was already declining before the sharp drop in crude oil prices globally. The new crude oil prices are way below the revised budget 2020 benchmark of $30 per barrel.
The country had to even sell its crude at a discount of less than $10 per barrel as oil demand keeps falling and the inventory of unsold crude keeps piling up. The newly agreed output cut by OPEC+ and other top oil-producing countries has cut down the country’s crude oil production to 1.4 million barrels per day excluding the condensates.
Even the output cut seems not to have the desired impact on the oil market as some OPEC members are considering further cuts due to the glut in the market.
Gov. Makinde presents N266 billion budget to Oyo State House of Assembly
Governor Seyi Makinde has presented a ₦266.64billion budget proposal to the Oyo State House of Assembly.
The Oyo State Governor, Seyi Makinde, presented the Budget Proposal for the 2021 Fiscal Year to the Oyo State House of Assembly. The total budgeted sum is ₦266.64billion, with education expected to receive N56.35billion – 21% of the budget and a rise from N12 billion budgeted in 2019.
This was disclosed by Governor Makinde in a social media post on Monday.
It was my honour to present the Oyo State Budget Proposal for the 2021 Fiscal Year to the Oyo State House of Assembly, today. This Budget of Continued Consolidation was prepared with input from stakeholders in all seven geopolitical zones of our state. pic.twitter.com/6ys0XFOgh1
— Seyi Makinde (@seyiamakinde) November 23, 2020
According to NAN, Mr. Makinde disclosed on social media that the ‘Budget of Continued Consolidation’ was prepared with input from stakeholders in all seven geopolitical zones of the state.
“The total budgeted sum is ₦266.64billion The Recurrent Expenditure is ₦136.26billion, while the Capital Expenditure is ₦130.38billion. We are again, aiming for at least 70% implementation of the budget,” he said.
The News Agency of Nigeria also disclosed that infrastructure spending in the budget would be N46.06billion – representing 17.27% of the total budget and an increase of N33.66 billion over that of last year.
Other sectors include Agriculture which represents 3.6% valued at N9.58billion and Healthcare taking 4.9% of the budget with an N13.29billion allocation.
The Governor disclosed that Oyo has reduced its infrastructure deficit and made improvements in the areas of healthcare, education, and others.
“We have been able to lower our infrastructural deficit, make improvements in healthcare delivery, improve the quality of education, and achieve milestones in our security systems,” he said.
He also added that the state had recorded a 26% increase in IGR at N25.6 billion and hopes to increase IGR to over N100 billion for the 2021 budget.
“As of September, we had recorded an IGR of N25.6 billion. And using the half-year figures, it represented a 26.4% increase in IGR year-on-year. Oyo State’s IGR is presently about 32% of actual aggregate revenue.
“We still have not achieved a total dependence on the state’s income outside of the federal allocation to fund the budget. Slowly, but surely, we are getting there.
“For the 2021 budget, our plan is to increase our annual IGR to N102.82billion. We hope to achieve this by widening the tax net to bring in more taxpayers into the system,” he added.
Restructuting: Plans must pass through legal process from the National Assembly – Tambuwal
Tambuwal has insisted that plans to restructure Nigeria and the Constitution must pass through due process from the National Assembly.
The Governor of Sokoto State and Former House of Reps Speaker, Aminu Tambuwal, has said that any plan to restructure Nigeria and the Constitution must pass through legal due process from the National Assembly.
Tambuwal disclosed this at a plenary session of the 26th Nigerian Economic Summit, titled: “Building partnerships for resilience” in Abuja on Monday.
Tambuwal warned that Nigeria must learn from mistakes 0f 2015 when the last attempt to amend Nigeria’s constitution was rejected after the first reading.
He added that any plan to restructure must be done after amending the constitution, which must pass through the assembly.
“As it were at the moment, whatever you are going to do about the constitution, has been prescribed by the constitution and how you are going to do it.
“The constitution has prescribed how a word in that constitution is going to be amended.
“Except of course we are saying we are going to jettison the National Assembly and the State Assemblies in getting it done, which is not possible,” he said.
“So you cannot go outside of the constitution to amend the constitution. We better come to terms with this realization and to come together and agree on how best we can work together to achieve what the nation desires,” he added.
What you should know
The agitations from the October protests in Nigeria have revived talks about restructuring in Nigeria. Earlier this month, the Governors of Ekiti and Kaduna State, Kayode Fayemi and Nasi El-Rufai argued that restructuring was a means to end Nigeria’s economic troubles.
“In essence, our desire to build a more perfect union should be anchored on the principle of devolution of powers – that is, re-allocation of powers and resources to the country’s federating units.
“The reasons for this are not far-fetched. First, long years of military rule have produced an over-concentration of powers and resources at the centre to the detriment of the states. Two, the 1999 Constitution, as has been argued by several observers, was hurriedly put together by the departing military authority and was not a product of sufficient inclusiveness.
“All points considered, the fiscal burden of maintaining a largely inefficient and over-bloated bureaucracy is a metaphor for shooting oneself on the foot,” Fayemi said.
Nigeria to exit recession by first quarter of 2021
The Minister of Finance has said that Nigeria will exit the economic recession by the first quarter of 2021.
The Minister for Finance, Budget and National Planning, Mrs. Zainab Ahmed, on Monday, November 23, 2020, said the country will exit recession by the first quarter of 2021 as the Nigerian government is working towards reversing the declining economic trend in the country.
According to Channels Television, this disclosure was made by Mrs. Zainab Ahmed while speaking on the latest GDP figures released by the National Bureau of Statistics (NBS) about the current recession in the country at the ongoing 26th Nigerian Economic Summit, organized by the Nigerian Economic Summit Group (NESG) and the Federal Ministry of Finance, Budget, and National Planning.
The Finance Minister said the COVID-19-induced recession followed the pattern across the world, where many countries had entered an economic recession.
Ahmed said, “Nigeria is not alone in this, but I will say that Nigeria has outperformed all of these economies in terms of the record of a negative growth.”
The country’s economy posted a second consecutive negative growth, contracting by 3.62% in the third quarter. This negative growth is much better than the 6.01% that was earlier forecasted by the NBS.
Also at the Economic Summit, Vice President Yemi Osinbajo, emphasized that the government is committed to working in synergy with the private sector to foster equitable growth and underpin national development.
The 26th Nigerian Economic Summit focuses on building resilient partnerships for Nigeria’s households, businesses, and the general economy.
What you should know
It can be recalled that on Saturday, NBS announced that the country had entered its second recession in 5 years in the third quarter of this year, as the Gross Domestic Product (GDP) fell for the second consecutive quarter.
According to figures released by the Nigeria Bureau of Statistics (NBS), cumulative Gross Domestic Product (GDP) for the first nine months of 2020, therefore, stood at -2.48%, just as it recorded a -6.10% in the second quarter.