Nigeria’s Minister of Finance, Budget and National Planning, Mrs Zainab Ahmed, has explained that the 2020 national budget estimate was based on $57 per barrel in order to contain the price shocks from expected oil glut of 2020.
The Federal Government chose the $57 per barrel benchmark as against the $60 per barrel in the 2019 budget.
In the budget breakdown presented yesterday in Abuja, Ahmed said hints from the global oil market suggest an oversupplied market in 2020, pointing at forecasts from the Organisation of the Petroleum Exporting Countries (OPEC), International Energy Association (IEA) and the US Energy Information Administration (EIA), who all predicted non-OPEC production growing by about two million barrels per day (mbpd) in 2019 and by more next year.
“We believe that this is a more realistic projection. For 2021 and 2022, the projections are 2.22mbpd and 2.36mbpd respectively.
“Actual daily crude oil production and exports have been below budget projections since 2013, despite installed capacity of up to 2.5mbpd, for a number of reasons. For 2018, actual production was 1.84mbpd and for the first half of 2019, it was 1.86mbpd (base production),” the minister said
As the minister spoke, analysts noted that oil prices fell more than two per cent as scant details about the first phase of a trade deal between the United States and China undercut optimism over continued tension between the two countries that had helped lift crude markets by three per cent at the end of last week.
Ahmed noted that the US shale oil accounts for most of the total supply increase, adding also that new projects in Norway, Brazil and Australia will also contribute to the increase in non-OPEC supply.
“Market sentiments did not support an expansion in demand, and growth in demand for OPEC oil and condensates specifically were projected to slow down next year,” she said. Oil production volume is projected to average 2.18 million barrels per day for 2020, even lower than the projected oil production volume of 2.3mbpd for 2019.
The minister said the real GDP growth projections in 2020 budget framework are 2.93%, 3.35% and 3.85% for 2020, 2021 and 2022, respectively. She explained that although this is short of the ERGP projection, the trajectory remained in the right direction.