• Sunday, May 26, 2024
businessday logo

BusinessDay

Lagos most prepared for oil slide as IGR tops 75% of budget

Oil

Most Nigerian states, except Lagos are ill-prepared to adjust for a prolonged slide in oil prices, the most recent internally generated revenue (IGR) data from the National Bureau of Statistics (NBS) shows.

Lagos State, in South West Nigeria, had internally generated revenues of N384.25 billion, equivalent to 76.9 percent of its 2013 budget of N499.10 billion.

No other state was able to go beyond the 30 percent mark for IGR as a percentage of budgeted expenditure for 2013, the NBS data showed.

Oil revenues account for up to 75 percent of the Federal budget. However, in some states like Zamfara, it goes as high as 97 percent.

The poor fiscal position of most Nigerian states come amid a 30 percent decline in oil prices since June 19, which has left the Organisation of Petroleum Exporting Countries (OPEC) disunited and dependent on non-members to shore up the market, according to former Qatari oil minister, Abdullah Bin Hamad Al Attiyah.

OPEC meets on Thursday Nov. 27 in Vienna. However, further complicating the cartels’ task is the boom in U.S. shale production, which has put the world’s biggest economy on course toward energy self-reliance.

U.S. output is expected to grow 12 percent next year, to the highest since 1970, according to the U.S. Energy Information Administration.

READ ALSO: Seplat Petroleum cuts debt leverage by $100m as low oil prices hit profit

An analysis of the most internal revenue generating state in Nigeria, from each region for 2013 showed that for the South-West region, Lagos led with N384.25 billion, South-South: Rivers N87.9 billion, South-East: Enugu N20.2 billion, North-Central: Kwara N13.83 billion, North-West: Katsina N6.85 billion, and North-East: Taraba N3.34 billion.

The data is showing that most states will be unable to pay salaries if the slide in oil prices continues, even as the Nigerian finance minister, Ngozi Okonjo –Iweala, says the country must adjust to a potential oil price shock.

“We have to adjust to the possibility that it is a permanent shock,” Okonjo – Iweala, said in an interview in London last week.

The states will have no comfort from fiscal buffers, with the Excess Crude Account depleted to $4.1 billion.

Nigeria’s gross external reserves, which are managed by the Central Bank (CBN) have also dropped 17 percent this year, to $37.2 billion as at November 20 from $43.5 billion, recorded on January 02.

The CBN will announce the outcome of its MPC meeting today (Tuesday) as it battles with a falling naira and depleting reserves.

“The CBN will be having a very important MPC meeting before the OPEC meeting as the country faces macro-economic challenges from oil price decline, reserve depletion, naira depreciation and inflation threat,” Kayode Omosebi, an equity analyst with UBA capital Plc, a Lagos based investment bank, said.

Further analysis of the NBS IGR data showed that Akwa Ibom’s IGR of N15.39 billion was equivalent to 3.25 percent of its 2013 budget of N470.1 billion.

Bayelsa’s IGR of N10.5 billion is equivalent to 3.45 percent of its 2013 budget of N304.05 billion, Delta States IGR of N50.2 billion is equivalent to 10.63 percent of its 2013 budget of N472 billion.

Anambra State’s 2013 IGR of N8.73 billion is only equivalent to 7.87 percent of its 2013 budget of N110.9 billion, Taraba’s IGR of N3.34 billion is equivalent to 4.57 percent of its 2013 budget of N73 billion, and Yobe’s IGR of N3.072 billion represents just 3.46 percent of its budgeted N88.6 billion for 2013.

Plateau State comes in at just 6.3 percent as IGR as percentage of the N133.4 billion it budgeted for 2013, while Katsina’s IGR of N6.85 billion is equivalent to 6 percent of its 2013 budget of N114.1 billion.

The import of the NBS data is that most Nigerian states are not viable without oil allocations from the centre.

PATRICK ATUANYA