BAD NEWS!!! IMF –NIGERIA OIL PRICE TO DROP BETWEEN $5
AND $15 IN 2016….SEE WHY.
Christine Lagarde,
Managing Director, International Monetary Fund (IMF), Washington DC; World
Economic Forum Foundation Board Member is seen during the Session 'The Global
Economic Outlook' at the Annual Meeting 2013 of the World Economic Forum in
Davos, Switzerland, January 26, 2013. | WEF/Moritz Hager
The days ahead may
just be harder than envisaged as the International Monetary Fund (IMF),
Thursday, said crude oil prices may slump to as low as $20 per barrel in 2016.
Following the
release of the “IMF Executive Board Concludes 2015 Article IV Consultation with
Iran” report, the body highlighted that the price of crude oil could drop
between $5 and $15 in 2016. Following the release of the “IMF Executive Board
Concludes 2015 Article IV Consultation with Iran” report, the body highlighted
that the price of crude oil could drop between $5 and $15 in 2016.
According to IMF,
the dwindling oil prices would not have overtly negative effect on Iran, whose
gross domestic product (GDP) is expected to rise four to 5.5 percent by 2017. Prospects for
2016/17 are brighter, owing to the prospective lifting of economic sanctions.
Higher oil production, lower costs for trade and financial transactions, and
restored access to foreign assets, are expected to lift real GDP to about 4–5.5
percent next year,” IMF said. The same cannot be
said for Nigeria, whose 2016 budget is benchmarked at an oil price of $38 per
barrel for the 2016 fiscal year.
With Nigeria
expected to produce 2.2 million barrels of crude oil per day in 2016 and sell
at $38 per barrel, the country expects to generate $83.6 million per day in
2016 – $30.514 billion in the year 2016. Going by IMF’s
predictions at $20, Nigeria would generate $44 million per day in 2016,
amounting to $16.060 billion in the year.
This would mean
that Nigeria would get at least 47.4 percent less revenue from oil than what is
already projected, consequently adding more pressure to the nation’s need to go
borrowing in 2016.
According to
President Muhammadu Buhari, oil related revenues are expected to contribute
N820 billion to the economy, while the budget deficit which stands at N2.22
trillion would be funded by foreign and domestic loans.
If the N820
billion expected from oil revenues is cut by 47.4 percent – the IMF projected
decline in oil prices – the nation’s budgetary deficit would move N388.68
billion to N2.59 trillion.
This is against
the Organisation of Petroleum Exporting Countries (OPEC) projections that the
global crude oil prices at seven-year low will not continue to fall, as it
could swing upwards soon.
The
Secretary-General, OPEC, Abdullah al-Badri, made this disclosure at the first
OPEC-India Energy dialogue in New Delhi.
It will be
recalled that oil prices fell by about two-thirds since mid-2014, with Brent
crude on Monday flirting with its lowest level since 2004 at just above $36 a
barrel.
According to him,
“I’ve been in the oil business all my life. I saw six cycles – I saw very high
price, I saw low price, and this is one of them. This will not continue
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