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Nigeria may lose N985bn oil revenue this year – PwC

Written by Maritime First

… As Jibrin: says Navy has achieved drastic reduction in crude oil theft

Should oil price average $55 barrels per day this year and recent oil production trends in the country continue, Nigeria could see about $5bn (N985bn) oil revenue shortfall, PricewaterhouseCoopers has said.

PwC’s economists, in a new report published on Wednesday, said this financing hole could widen to about $10bn in the event of a re-emergence of Iran oil production in the second quarter of the year as price is expected to hit a low point of $35 per barrel, slowly recovering to an average of $45 per barrel.

They said significant debt issuance and cuts to recurrent expenditure would be needed, adding that state governments could struggle to borrow from the financial markets to pay their workers.

According to the report, some highly-indebted states may miss planned interest payments on their debts.

If oil production falls by 15 per cent through bunkering and other supply disruptions, gross oil revenues will fall to a third of the 2013 level (about $43bn), it stated.

“Combined with difficulties of administering tax collection from unstable parts of the country, we would expect the Federal Government to fall over three months behind on paying employee wages and government bond yields on US dollar-debt could approach 20 per cent,” the economists noted.

They said that they expected that if the oil price continued to stabilise, the Central Bank of Nigeria’s recent adjustment of the exchange rate regime would be sufficient to ease pressure on the naira this year.

“However, if oil prices deteriorate further, a further 10 per cent devaluation of the naira will be necessary in 2015,” they stated.

They said any deterioration of the political and security landscape could unnerve investors and tip the country into recession.

If a ‘medium’ political shock occurs against the backdrop of a severe oil price scenario, the report predicts that Nigeria’s economy could see zero growth or even contract in 2015 and 2016.

It, however, stated that despite the uncertainties generated by the volatility in oil prices and the significant drop in government revenue, the Nigerian economy would continue to grow, even if oil prices fall to $35 per barrel and average just $45 in 2015, provided there was no deterioration of the political and security landscape.

A Partner and Chief Economist at PwC Nigeria, Dr. Andrew Nevin, said, “Our modelling and forecasts show that while the economy will continue to struggle even under the most benign scenario, it will be able to realise growth averaging four per cent for the period.

“Despite oil’s importance to the Nigerian exchequer, the real economy is largely insulated against falling oil prices. This is driven by the fundamental structure of Nigeria’s economy and how the oil and public sectors interact with the non-oil sector.”

In the mean time, the Chief of Naval Staff (CNS), Vice Adm. Usman Jibrin, has said that the Nigerian Navy in the last one year has achieved a drastic reduction in crude oil theft.

Jibrin who was represented by the Chief of Policy and Plans, Rear Admiral Johnson Olutoyin stated this during the Inter-Denominational Church Service, marking the 59th Anniversary of the Nigerian Navy, at the All Saints Protestant Church,  Mogadishu Cantonment, Abuja.

He said the Nigerian Navy was working assiduously to rid the country’s waters of illegal activities and has done tremendously well over the past years.

According to the Naval Chief, the success of the navy has been attested to by the drastic reduction in crude oil theft and illegal activities in the country’s maritime environment.

He said: “There is no doubt that the navy is working assiduously to continue to fight the pockets illegal activities that still remain in our maritime environment.    And that is why we are grateful to President Goodluck Jonathan for the recent acquisition of needed platforms into our fleet.

“Also, the addition of these platforms will assist the navy in its policing operations and be able deal effectively in the remaining areas  of security challenges in our maritime domain”.

Speaking further, Jibrin urged the officers and ratings and civilian staff of the navy to be prayerful, steadfast and faithful adding that the nation was passing through a critical period.

He told the officers and ratings to be peace loving citizens of the country and abide by all the principles that would foster unity in diversity.

As we celebrate, he urged, let us be of goodwill to one another by improving the lives of our fellow human beings and working together to make the navy and the country greater.

Earlier,  the Director of Naval Chaplaincy, Rev. Godshelp Osaghae, had in his sermon titled: “Jesus is the Answer”, said with men some things are impossible but with God all things are possible.

Osaghae, taking his text from John 1 verse 1 to 4,  said that it was the grace of God that has kept everyone alive.

“As we are celebrating the 59th Anniversary, I commit the navy to the word of God who make all things possible”, he prayed.

Punch With additional reports from Ships and ports

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Maritime First