The Brent Crude, against which Nigeria’s crude oil is priced, has been trading more than $20 higher than the Federal Government’s benchmark for this year’s budget in recent months.
Brent crude, which closed at $51.22 per barrel in December, reached the $60 per barrel mark in February and rose further to as high as $70 per barrel before paring some of its gains. It closed at $64.86 per barrel on Thursday.
This positive development has pushed Nigeria’s oil revenue above the estimate in the 2021 budget, which was based on an oil price benchmark of $40 per barrel and a production level of 1.86 million barrels per day.
Using an average price of $60 per barrel and a production level of 1.42 million barrels per day, the country’s total oil revenue stood at $2.39billion in February, compared to budgeted revenue of $2.08billion.
Nigeria relies on crude oil for about 50% of government revenues and over 90% of export earnings, therefore rising oil price means increased revenue. On the other hand, rising oil price also translates to increased cost of petroleum products as the country depends heavily on imports due to a lack of domestic refining.
The Organisation of the Petroleum Exporting Countries (OPEC), in its monthly oil market report for March, said the country’s oil production rose by 63,000 barrels to 1.42 million bpd in February, based on direct communication.
OPEC had in February said the rise in global oil prices could brighten Nigeria’s outlook this year.