Africa’s biggest oil producer racks in a total of N4.3 trillion from Petroleum Profit Tax (PPT) and Royalties in Nigeria oil and gas sector within fifteen months, according to data obtained from the Central Bank of Nigeria (CBN).
BusinessDay analysis of CBN’s Economic Report for the fourth quarter of 2018 showed from Q4 2017 to Q4 2018 which is a total of 15 month Nigeria earned N4.3 trillion from its upstream business in form of royalties and petroleum profit tax thanks to a combination of higher oil prices and relative stability in production.
In Q4 2017 the country earned N666.10 billion while from Q1 to Q4 2018 the country earned N3.72 trillion which represented an improvement of 106.7 per cent compared to N1.8 trillion recorded within the same period in 2017.
In q1 2018, Nigeria earned N926.33 billion which reduced slightly to N841.03 billion in Q2 while in Q3 and Q4 2018 the country earned N914.56 billion and N1.04 trillion respectively.
Analysis of the report showed earnings from royalties and PPT of N3.72 trillion from the petroleum industry in 2018 represented 40.9 per cent of the 2018 budget of N9.1 trillion and 42.1 per cent of 2019 proposed budget of N8.83 trillion.
Further analysis showed royalties and PPT revenue of N3.72 trillion generated in 2018 represents 128 per cent of 2018 budgeted capital expenditure (N2.9 trillion), 78 per cent of 2018 budgeted recurrent expenditure of N4.72 trillion and 40.8 per cent of total allocation (N9.120 trillion).
Despite the increase in crude oil price during the period, CBN Quarterly bulletin said oil revenue declined relative to the proportionate budget owing to shortfalls in crude oil production and exports, arising from maintenance at various NNPC terminals.
“The estimated increase in production was attributed, largely, to gains from sustained partnership with government and stakeholders in the Niger-Delta region and the security measures put in place to forestall production disruption and losses through pipeline vandalism,” CBN Quarterly bulletin said.
According to the proposed budget of the 2019 fiscal year, the Federal Government projects about N3.73 trillion as oil revenues. This figure was derived from two presumptions; first, that in the year, oil will sell at a projected $60 per barrel; second, that oil production will hit 2.3 million barrels per day. Daily crude oil production estimate of 2.3 million barrels per day is the same amount as budgeted for the 2018 fiscal year.
Nigeria’s crude oil production, including condensates and natural gas liquids, averaged 1.86 mbd or 171.12million barrels (mb) during the review quarter representing an increase of 2.2per cent, compared with 1.82mbd or 167.44million barrels at the end of the third quarter of 2018.
Crude oil export averaged1.41mbd, representing an increase of 2.9per cent above1.37 mbd in the preceding quarter.
“With proper policies, Nigeria can definitely make more money from oil than its currently making, moreover the current oil revenue is still not enough to make up for Nigeria’s infrastructural deficit,” Ademola Henry, Team leader at Facility for Oil Sector Transformation (FOSTER II) said.
Nigeria relies heavily on crude oil revenue to fund government spending. Oil accounts for about 15percent of Nigeria’s GDP but it makes up about 80percent of government revenue. Thus, a decline in oil price has an adverse impact on government revenue, thereby increasing the requirement for borrowing and debt servicing and attendant impact on the funds available for capital expenditure.
With external reserves fluctuating at $42.83 in February 2018 a trend which will generate concern for the country economic managers who will aim to continuously defend the Naira in the face of flux in foreign reserves.
Today, Nigeria is only capable of pumping some 2.5 million barrels of crude oil per day despite sitting on more than 40 billion barrels of proven reserves with its mid-stream and downstream infrastructure are arguably in worse shape than upstream production.
