Nigeria needs oil price of USD139 a barrel to balance the budget

Fitch (the financial ratings agency) today announced that Nigeria requires a price of $139 per barrel for its Bonny Sweet Light crude oil in order to balance the national budget.

This may well be true, given the ridiculous budget that gets approved each year with its stuffing, enormous level of recurrent expenditure, wastage on state allocations to buy off governors and senators and other non productive revenue (such as Delta ransom).

In order to fund such extravagance that generates neither short nor long term gain, then a large income is required.

In other ways, one has to view this information as just information and not news.

It’s not fake news but is it surprising or material? The answer is no.

Many countries are running large deficits.

These deficits are funded  by borrowing.

Nigeria is doing the same.

In addition, if the government is truly trying to move away from the petrodollars curse, we should expect some short term pain in the form of borrowing to facilitate the incubation of new industries.

This is not to say the government is managing the transition well, or even managing it at all, but that is the stated objective and it is reasonable to expect some pain.

So is this information surprising? Perhaps no.

Should we be surprised? No.

Should we be worried? Well, perhaps if it goes on for a number of years without a tangible resulting industrial diversification but for a readjustment period it is perhaps reasonable.

Be the first to comment

Leave a Reply

Your email address will not be published.