Between January and July this year, Nigeria has recorded oil revenue of N1.950 trillion out of N1.985 trillion projected for 2017 indicating that earnings may have already exceeded projections when the figures for August and September are computed.
According to data released by the Nigerian Bureau of Statistics (NBS) a government-funded statistics body, and compiled by BusinessDay, Nigeria earned N1.068 trillion in crude oil sales for both the foreign and domestic market, recorded N85 billion as gas sales and N263.3 billion in royalties for both oil and gas.
Within the same period, Nigeria charged N104million as rent, collected N1.3billion as penalties for gas flaring. Pipeline fees and sundry earnings amounted to N6.8billion, while the country collected N524.2 billion as petroleum profit and gas taxes.
This improved revenue profile is impacting the economy, helping it slip out of a bruising recession in the second quarter of 2017, after contracting for six quarters. The extractive sector grew 1.6% year-on-year as against -11.6% YoY last year, on the back of an increase in oil production, to an average of 1.8mn b/d.
The increase in the level of production has been because of the relative peace in the Niger Delta , as militants have ceased to bomb crude oil pipelines.
The strategic Trans Forcados Pipeline which was repaired earlier this year, resumed full operations in June, with about 300,000 barrels per day, taken to terminal for export to the global market.
While analysts say this is the consequence of relatively stable oil prices, in their view, it is still too early to roll out the drums.
“This budget that we are running is heavily debt financed, so there is nothing to celebrate yet, we need to get to a point where we can be close to balancing the budget, then we should celebrate. There has been a lot of borrowing by the government at very high rates and its not sustainable,” Taiwo Oyedele, PwC Nigeria, head of tax practice, told BusinessDay by phone.
Nigeria’s non–oil revenue on the other hand, was N999.015billion, comprising of N348.8 billion collected as excise and fees, imports duty and other customs revenue, while companies’ income tax and other taxes amounted to N650.2billion, according to NBS data.
Oyedele said Nigeria should focus on growing its non-oil revenue, as this is a better measurement of an economy that is recovering. The future of crude oil, analysts say, looks bleak, with 10 European countries setting targets for bans on cars powered by fossil fuels.
Emmanuel Afimia, CEO of Afima consulting services, said the actual revenue from crude oil was less than expected last year, leading the government to ramp borrowing and called for action to grow non-oil revenue. “In summary, there is an improvement in the oil sector, leading to revenue growth, but a gap between actual and expected revenue has led to increase in the country’s debt.”
However, improved revenue from crude oil sale is spurring optimism that Nigeria’s voluntary commitment to cap its oil production at 1.8million barrels per day, in line with the Joint OPEC-Non OPEC Technical Committee (JTC) agreement, would not affect funding of the national budget.
In August, Kachikwu had explained that the 1.8mb/d cap would take effect only when Nigeria’s daily production hits that level on a sustainable basis, and even then, it pertains only to crude oil and not condensate, which was part of the N2.2m b/d production of 2017 budget estimate.
But Nigeria seems not to be worried about production cap affecting budget funding, because it is borrowing sufficiently to cover any shortfalls. According to data from the Debt Management Office (DMO) website, Nigeria’s total debt stock as at June 2017 stood at N39.216 billion.
“Nigeria’s economy depends largely on crude oil revenue, which means that other sectors of the economy also benefit from its increase. However, it will take some time for the other sectors to feel the effect of the increase in oil revenue,” said Afima.
ISAAC ANYAOGU
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