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FG May Exceed ₦7.89 Trillion 2021 Revenue Target As Oil Prices Soars

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FG May Exceed ₦7.89 Trillion 2021 Revenue Target As Oil Prices Soars
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-Price hovers 20% above budget benchmark.

There are indications that the Federal Government may be on course to meet and perhaps, surpass the projected oil revenue target in the 2021 budget if the recent rise in the prices of crude oil is sustained into the new year.

Investment analysts observed that besides meeting the oil revenue target, Nigeria also stands the chance of reducing the budget deficit estimated at N5.2 trillion and government’s borrowing to fund the budget if the ongoing surge in the international oil price is sustained for the rest of 2021.

The prices of Brent Crude surged above $50 per barrel last week (20% above the budget benchmark) following optimism that the global Gross Domestic Product (GDP) is recovering from the Covid-19 pandemic on the back of vaccine discovery and hope of distribution and also reflects the ability of the Organization of the Petroleum Exporting Countries (OPEC) plus Russia (OPEC+) to enforce some level of collective production cuts.

Meanwhile, the federal government has estimated that revenue from oil sales would contribute not less than 25.5 percent to its 2021 revenue target after setting oil revenue projection at N2.01 trillion.

Following the projections, the federal government had also set oil price benchmark at $40 per barrel, while daily oil production is benchmarked at 1.86 million barrels per day.

Vanguard Public Finance analysis shows that collections from oil revenue for third quarter ended September 30, 2020(Q3’20) stood at N953.09 billion, N1.06 trillion or 52 percent and 63.9 percent short of the 2020 and 2021oil revenue targets respectively.

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Despite the shortfall, investment analysts have said that the FG may still attain the target but stated that realisation of the target would also depend on maintaining the oil production target throughout the year.

Further breakdown showed that collections from oil revenue in Q3’20 was 25 percent and 28.9 percent lower than receipts in Q2’20 and Q3’19, respectively, but represented a 7.6 percent increase above the revised benchmark of N886.16 billion for the period.

Experts’ opinion

Financial experts who spoke to Vanguard Public Finance explained that global oil price above US$50 would enable the country achieve the oil revenue target and would lead to improved dollars inflow into the country.

Victor Chiazor, Head of Research, FSL Securities, said: “The rise in crude oil prices remain positive to the Nigerian economy. Given the 2021 oil benchmark price of US$40.00 per barrel, a global price above US$50 per barrel will effectively enable Nigeria achieve its oil revenue budget once our oil production volumes are not affected during the period.

“A higher oil price for the fiscal 2021 period will also help reduce the budget deficit and reduce government borrowing needed to fund the 2021 budget.”

He, however, said that the government needs to focus on revenue sources to cushion the impact on any unforeseeable occurrences in the oil market that may negatively affect the revenue target.

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He said: “We, however, need to remain cautious with regards to oil prices remaining above the US$40 budget benchmark for the entire fiscal year 2021, as there remains significant headwinds which may drive oil prices lower in the short term and therefore we need to focus on other revenue sources for the federal government outside of crude oil.”

Corroborating him , Ayodeji, Ebo, Senior Economist/Head, Research & Strategy, Greenwich Merchant Bank, said: “The uptrend in crude oil prices is positive for Nigeria given the high dependence on oil revenue and historical shortfall in non-oil revenue. With the oil price above the budget benchmark, the government should be able to meet up with its projected revenue from oil,

“However, the downside risk is the OPEC + production cut which is significantly lower than 2021 budget projection. Recall that the excess above the budget oil price benchmark is kept in the Excess Crude Account which is the savings for the raining day. To avoid continuous revenue vulnerability to crude oil prices, there must be increasing effort towards improving the non-oil revenue target.”

In their own views, analysts at Coronation Merchant Bank, said: “As a rule of thumb, Nigeria’s public finances work well when oil trades consistently above US$50 per barrel. Oil provides (in a good year), the federal government with upwards of 60 percent of its revenue and supplies the country with over 80 percent of its export earnings.

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Since much of these earnings are banked by the Nigerian National Petroleum Corporation (NNPC) with the Central Bank of Nigeria (CBN), this is a crucial source of foreign exchange (FX). So, for example, the long period of low oil prices from the end of 2014 through to mid-2017 (the price of Brent averaged US$45.10/bbl in 2015 and US$56.09/bbl in 2017) led to a depressed level of CBN FX reserves.

This precipitated two devaluations in the interbank exchange rate, from N199/US$1 to N316/US$1 in mid-2016 and from N316/US$1 to N357/US$1 in August 2017.

“Therefore, the recent rise in the price of Brent comes at a good time for the CBN. This year the CBN has avoided the fate it suffered in 2016 and the first half of 2017, namely a level of reserves below US$30.00bn (the current reported level is US$34.97bn). The cost of this preservation has been a sharp reduction, starting in March, in the CBN’s supply of US dollars to the NAFEX market.If an oil price above US$50 per barrel takes root in 2021, it will be tempting to think of the nation returning to normal.

Normal, in this instance, means a healthy inflow of US dollars from oil that supports the revenues of the government and allows the CBN to be supplier of last resort to the foreign exchange markets.Therefore, an oil price above US$50 per barrel brings the prospect of improved US dollar inflows.”

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Labour Party Anambra Not for Sale – NLC Boss

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Labour Party Anambra Not for Sale - NLC Boss
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Labour Party Anambra Not for Sale – NLC Boss

…Warns Those Parading Themselves as Party Officers to Desist Forthwith

By Abuchi Onwumelu

The Chairman of Nigeria Labour Congress (NLC), Anambra State Chapter, Comrade Jerry Nnubia (Ezennia) this afternoon warned those parading themselves as party officers to desist forthwith, emphasizing that NLC owned the party and its structure nationwide.

Addressing Newsmen in Awka, Comrade Nnubia who is the immediate past president of Nigeria Union of Local Government Employees (NULGE) said that Labour Party were duly registered and nurtured by Nigeria Labour Congress and would not allow anybody or group to hijack it.

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His words, ‘We received the report of an ongoing scam by some persons who claim to be national officers of the Labour Party.

‘We understand that these persons led by one Mr. Julius Abure have been sneaking around Anambra State soliciting for money from governorship aspirants in the forthcoming Anambra State gubernatorial election.

‘ We wish to publicly state that these characters are unknown to Labour Party in Anambra State. There is only one national leadership of the Labour Party in Nigeria and it is under the caretaking of Comrade Maria Lebeke.

‘This interim leadership enjoys the goodwill and support of the Nigeria Labour Congress and the Trade Union Congress who are the authentic owners of the Labour Party and in whose custody the Certificate of Registration of the Labour Party is currently kept.

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‘We understand the huge temptation faced by many politicians in Anambra State to get on board the platform of the Labour Party given the popular appeal of our great party.

Labour Party Anambra Not for Sale – NLC Boss

‘We urge all gubernatorial aspirants wishing to contest under the platform of the Labour Party to please avoid doing any business with Mr. Abure and his company of journey men as such exercise would amount to nullity, waste of resources and a huge stench on their political profile and personalities as the public would see them as being heedless, desperate, and reckless.

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‘While we continue to serve the interest of workers and the masses, we reiterate that the Labour Party in Anambra State is not for sale. Comrade Jerry Nnubia
State Chairman, NLC, Anambra State Council concluded.

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Cement price was not increased – BUA

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Cement price was not increased - BUA
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Cement price was not increased – BUA

BUA Cement Plc has stated that there is no increase in price of its Cement products.

BUA company has there called on the general public to ignore any rumour of a price increase.

“We are compelled to release this statement following requests from our distributors and customers seeking clarification as to whether BUA also intends to increase the price of its cement. This is in view of a purported increase of N260 by another major Cement producer – Dangote Cement.

[“We are now aware that Dangote Cement has increased the price of its Cement (ex-factory) by N260 effective Monday, June 14, 2021. BUA is not a part of this increase and will not seek to increase the price of its cement (ex-factory) in the foreseeable future. BUA therefore restates its earlier position communicated on April 24, 2021 that it will not join in any increase in the prices of Cement for the foreseeable future.”

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” Whilst we believe it is the prerogative of any company in a free-market economy to determine the prices of their products as they deem fit, based on their urgent business needs, our position not to increase our own prices is anchored on the following:

“We are aware of the feedback and outcry from the public, and the government on the high retail price of cement in a period of economic recovery. BUA is also of the firm belief that the current retail prices of Cement are higher than normal, hence our earlier communication not to increase ex- factory prices in the foreseeable future.”

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Cement price was not increased – BUA

“Since our last communication to our customers and the public, we have noticed a slight decline in the price of cement due to the commencement of the rainy season – during which demand is reduced. We believe that any further increase in prices will hamper a continuous downward trend as well as hamper a normalization/stabilization of prices of the commodity.”

“As a responsible corporate entity, we refuse and reject associations with any actions that are deemed capable of projecting any industry we operate in as a cartel. Hence, whilst we respect that the said company has decided to increase their prices, we are not questioning the reason(s) why, but would like to make clear BUA’s position on a price increase.”

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“The Timing is not right for any increase on BUA’s part, and we do not have any justifiable business reason to increase our prices (ex-factory) anytime soon. We hope that despite this producer’s price increase, the overall retail price of cement and current downward trend in prices will not be affected negatively.”

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Naira Now Gaining Against The Dollar – See Why

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Naira Now Gaining Against The Dollar - See Why
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Naira Now Gaining Against The Dollar – See Why

The exchange rate between the naira and the dollar at the parallel market strengthened on Thursday, rising from N503/$1 to N485/$1. Initial checks by Nairametrics reveal the rebound of the naira from one of its lowest points in about 4 years held its support levels after the initial rise from N505/$1 to N497/$1 on Wednesday.

Sources inform Nairametrics that the trigger for the recent gains is related to chatter that the central bank may be gearing up to pump forex into the retail end of the market as part of its efforts to boost liquidity. Nairametrics reported recently that the CBN was going to sustain massive funding of Bureaux De Change (BDC) operators according to the President, Association of Bureaux De Change Operators of Nigeria (ABCON), Alhaji Dr Aminu Gwadabe. He had told reporters last week that the CBN was “committed” to improving selling forex to over 5,000 operators.

Nairametrics understands this may have triggered a slow down of demand by speculators who fear they might be on the wrong side of the bargain should the CBN make good its promise. We are yet to get official confirmation if indeed, FX was sold during the week by the CBN to BDCs.

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The ABCON Chairman has also chastised speculators, blaming them for the recent depreciation of the naira and accusing them of creating artificial scarcity in the market.

“The ABCON and CBN have observed with disdain the speculative behaviour currently beclouding the market with the misinformation that the CBN has adopted I&E window as its official rate. The above information is not true because as operators we still funded our accounts at our normal rates of N393/$ and not the I&E window rates for our operation this Friday.’’ Gwadabe.

BDC Operators also suggested earlier in the month that they were considering banning street trading of forex as a strategy for curbing FX speculation. They called it ‘Operation No Street Trading.’

Naira Now Gaining Against The Dollar – See Why

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“All operators are to collaborate in bringing down the forex rates in the market; street trading by BDCs should be discouraged/banned and ABCON will commence operation ‘no street trading ’. BDCs should improve return rendition to regulatory authorities; margin review to meet operational requirements; widening the scope of transactions; digitalization of BDC operations. ABCON to punish errant members; ABCON compliance officer and staff to commence nationwide supervision of BDC operations.” ABCON

Exchange rate
Dealers who spoke to Nairametrics on Thursday confirmed an exchange rate of N485/$1 if you wish to sell dollars and N492/$1 should you want to buy in the parallel market respectively. This also suggests without any empirical data that the sell pressure might be sustained in the short term.

In a major boost to the outlook of Nigeria’s forex supply, oil prices have remained above $70 per barrel with some analysts predicting it could rise past $80 and soar to $100 as the world gradually returns to full capacity. Nigeria relies heavily on oil for over 50% of its forex supplies.

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A reliable source also informed Nairametrics that the CBN is considering closing the disparity between the official market and parallel market rates but prefers a rate that is stronger than the N485/$1 currently being traded. The CBN hopes to achieve this by injecting more forex into the market.

Despite the fall in forex prices on the black market, those sourcing for wire transfer forex still pay above N500/$1. A source informed Nairametrics that they purchased for about N505/$ on Thursday via wire transfers to a foreign currency denominated account.

The World Bank recently blamed CBN Policies for Nigeria’s forex woes calling on the apex bank to allow greater flexibility in the forex market so as to instil confidence in the market and open the floodgates for foreign investment into the country. The CBN recently adopted the NAFEX rate published by the FMDQOTC as its official reference price.

Nairametrics.com

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