“Nigeria’s low levels of accumulated oil windfall savings imply that its oil-price vulnerability kicks in at a much higher threshold than the official oil price benchmark suggests,” said Standard Chartered analysts led by Samir Gadio, head of the bank’s Africa Strategy and FICC Research, in a recent report. The 2014 Nigerian budget is based on a benchmark oil price of $77.5/ barrel. However any price cushion is eroded from the unrealistic production assumption of 2.3 million barrels per day, as output has been running close to the 1.9m bpd mark.
Nigeria’s fiscal risks have become elevated as the retreat of oil prices is bringing them closer to the break-even point at which the Federal and State government budgets become untenable.
Nigeria’s benchmark Bonny light crude oil traded at $97.9 per barrel on September 12, down 14 per cent from $111.9 per barrel in May, according to data from the Central Bank (CBN).
The Federation Account Allocation Committee (FAAC) allocation to the Federal, States and Local Governments fell by 13.4 per cent to N654.6 billion in July, down from N755.95 billion in June.