Federal government is amending its 2020 budget crude oil benchmark to assume an oil price of $20 per barrel, Finance Minister Zainab Ahmed has said just as Nigerian crude oil differentials showed signs of recovery, finding support from the prospect of big cuts in output as part of OPEC’s new supply reduction agreement. Qua Iboe was assessed at dated Brent minus $4.00 a barrel, up 45 cents from Monday, which was an historic low brought about by a collapse in demand and excess supply due to the coronavirus crisis. The number of unsold May-loading cargoes is thought to be 13-19, suggesting a supply glut is easing. Traders say Nigeria is making sizeable cuts in output from May 1, when the new cut by OPEC and its allies took effect. “I think it will be big,” one trader said. “They can do a lot through tolerances and by deferring a few cargoes a few days from one month to the next. Differentials will collapse if they don’t.”
Nigeria’s economy, which emerged from a recession in 2017, was already contending with low growth of around 2 per cent before oil prices plummeted. Africa’s top oil exporter relies on crude sales for around 90 per cent of foreign exchange earnings and more than half of government revenue. Global crude oil prices have plummeted in the last few months. In March, the finance minister said the budget would be cut and the initial assumed oil price of $57 per barrel would be reduced. “We are in the process of an amendment that is bringing down the revenue indicator to $20 per barrel,” said Ahmed in a web conference about the impact of low oil prices on the country.
Ahmed also said Nigerian oil and gas projects will be “delivered much later than originally planned” due to upstream budget cuts. Nigeria’s economy has been battered by low oil prices following a dispute between Russia and Saudi Arabia, as well as the impact of the new coronavirus pandemic. Africa’s most populous country recorded its first confirmed coronavirus case in late February. There have been 2,802 recorded cases and 93 deaths out of 200 million inhabitants.
Federal government also said it will spend $311 million returned after being stolen by former military ruler General Sani Abacha on infrastructure development, a presidency spokesman said. The United States and the British dependency of Jersey agreed with the Nigerian government in February to repatriate money that Abacha, who died in 1998, had stashed in their banks. Nigeria’s attorney general said on Monday the funds had been received following an agreement requiring the money go towards infrastructure projects, and if any cash was diverted Nigeria could be required to replace it. Poor infrastructure has long held back development in Africa’s biggest economy, where the statistics office estimates 40% of the country’s 200 million people live in poverty.
Garba Shehu, a spokesman for the president, said on Twitter the money would be used for road and power projects. “These funds have already been allocated, and will be used in full, for vital and decades-overdue infrastructure development: The second Niger Bridge, the Lagos-Ibadan and Abuja-Kaduna-Kano expressways,” said Shehu, referring to a river crossing in the southeast and roads connecting major cities. In another tweet, he said part of the money would be invested in the 3,050 megawatt Mambilla hydroelectric plant, which has been planned for over three decades. Abacha ruled Nigeria from 1993 until he died in 1998. Corruption watchdog Transparency International estimates he stole as much as $5 billion of public money during that time, though he was never charged with corruption while he was alive.
