Nigeria’s excess crude oil account, the only buffer for the country against oil revenue volatility, fell seventy-six percent to just above six hundred million dollars in three weeks causing consternation across the land but it could be a taste of what to expect next year as oil price continues to collapse unstoppably.
Oil prices plunged another four per cent Thursday taking prices below the level all but one OPEC country needs to square their 2019 budgets and avoid the risk of economic dislocation and social unrest.
At Thursday’s Brent price of $55 a barrel, only uber-wealthy and sparsely populated Kuwait will be able to make ends meets next year. OPEC heavily oil dependent countries like Nigeria along with giants Saudi Arabia, Iraq and Iran need much higher prices.
Nigeria’s president Muhammadu Buhari presented the draft 2019 appropriation before parliament Wednesday and its details are now being digested.
The budget is less than a third that of peer country South Africa and just over half that of Angola, both with smaller populations relative to Nigeria.
Bloomberg reported Thursday that as oil revenues fall, OPEC governments could soon face social unrest due to slower economic growth and higher unemployment.
They’ll also have far less money to invest in the petroleum sector to keep output up.
Of all OPEC nations, only Kuwait can cover its budget with oil prices below $60 a barrel, according to data from the International Monetary Fund. Qatar, which is leaving the cartel on January 1, would be able to break-even at just $44 a barrel. Libya and Algeria need prices around $100 a barrel.
Saudi Arabia, which announced its 2019 budget this week, is betting on higher oil revenues to finance a third consecutive year of fiscal loosening. Jason Tuvey, analyst at Capital Economics, a London-based consultancy, said the Saudi budget “appears to be premised on prices averaging $80 a barrel.”
Brent crude, the global benchmark, fell on Thursday to a low of $54.65 a barrel, compared to $27.10 in January 2016. Brent traded as high as $86.74 on October 3, this year.
