By Adedapo Adesanya
The federal government, through the Minister of Finance, Budget and Planning, Mrs Zainab Ahmed, has lowered benchmark for oil price for the 2020 budget to $55 per barrel from $60 per barrel in the 2019 Appropriation Act.
The Finance Minister made this known on Tuesday at the presentation of the Medium-Term Expenditure Framework and Fiscal Strategy Paper (MTEF/FSP). She said the price was brought down due to “strong indications” of an oversupplied oil market next year. According to her, the $55 per barrel benchmark amid expected oil glut in 2020 would help cushion against an unexpected price shock.
Mrs Ahmed further said that Nigeria, Africa’s largest oil exporter, was producing roughly 2.3 million barrels per day of crude oil and is projected to produce an average 2.18 million barrels per day for 2020.
“Although this is lower than the projected oil production volume of 2.3 million barrel per day for 2019, we believe that this is a more realistic projection,” the Finance Minister stated.
Looking ahead, she said, “For 2021 and 2022, the projections are 2.22 million barrels per day and 2.36 million barrel per day respectively,” revealing that Nigeria has agreed to a cap of 1.685 million barrels per day of crude oil with the Organization of the Petroleum Exporting Countries (OPEC).
Africa’s largest economy is also the continent’s biggest oil exporter and relies on crude sales for around 90 percent of its foreign exchange.
Nigeria has struggle to improved its foreign reserves this year as a result of instability in the crude oil market. The Brent, this year, has traded lower than the $60 per barrel mark the country estimated it should not go below this year. This has put pressure on the reserves, which fell below $43 billion on Tuesday for the first time in six months.
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