Nigeria risks not meeting 2014 crude oil target, says S&P

THERE are indications that the country’s crude oil output as projected on the Federal Government’s 2014 appropriation bill, pending before the National Assembly, may have been overstated.
A globally acclaimed financial analytical and credit rating company, Standard & Poor’s (S&P), which made the disclosure yesterday said increased tensions in the country’s crude-producing regions in the run-up to 2015 presidential elections may escalate the situation.
The position was further heightened as report showed that oil production averaged less than two million barrels a day in 2013, compared with the government’s projection 2.53 million barrels.
“It’s a concern if they have a big rise in pre-election expenditure and there’s a big revision on the oil price or there is a production shortfall due to Niger Delta tensions. High global oil prices are helping to sustain the picture as it stands now,” an analyst at S&P, Ravi Bhatia, said.
Recently, the Minister of Finance and Co-ordinating Minister of the Economy, Dr. Ngozi Okonjo-Iweala, painted a gloomy picture of the fiscal year as she warned of pressure for more expenditure from unions and groups, amid dwindling revenue occasioned by unabated oil theft.
However, President Goodluck Jonathan’s administration has been battling with rampant oil theft and unrest in the Niger Delta, where most crude is pumped.
But the Governor of the Central Bank of Nigeria, Lamido Sanusi, while pledging to contribute to keep the budget deficit under control, said the apex bank is bracing for fiscal “shocks” ahead of the elections.
Historically, in 2011, government spending climbed 17 per cent before the presidential election.
Already, the budget proposal had for 2014, projected 2.39 million barrels a day, which analysts said it is “optimistic”, but blames on shortfalls have been directed to “incessant crude-oil theft”.
Investigations have also showed that a handful of spills occur every year in the country through pipeline ruptures caused by corrosion, poor maintenance and equipment failure, as well as by thieves and saboteurs.
The proposed budget, based on an oil price of $77.5 a barrel, may be altered if there is a $10 to $15 fall in the global oil price, causing the fiscal imbalance to the country.
Also, Nigeria is expected to save revenue from oil prices above that level in its Excess Crude Account, as already there is a dwindling in the account’s balance.
Recently, S&P raised Nigeria’s credit rating to BB-, three steps below investment grade, in November 2012, though with a stable outlook.