» Crude Oil Price Could Fall To $20 In 2016 – IMF «

Nigeria may be in for harder times than previously
envisaged as the International Monetary Fund has
predicted that crude oil prices may slump to as low as $20
per barrel in 2016.
In the ‘IMF Executive Board Concludes 2015 Article IV
Consultation with Iran’ report, the body highlighted that the
price of crude oil could drop by between $5 and $15 in
2016, cableng.com reports.
As of Thursday, the price of crude oil in the international
market averaged $37. On December 17, the price fell to $36
per barrel.
The Federal Government 2016 budget had based the 2016
budget on a benchmark oil price of $38 per barrel. If the
IMF prediction comes true, the country will be in serious
trouble as there won’t be any buffer for the budget.
Crude oil revenue accounts for about 90 per cent of
Nigeria’s foreign exchange earnings. Nigeria is projected to
produce 2.2 million barrels of crude oil per day in 2016. If it
sells at $38 per barrel, it will generate around $83.6m daily
or $30.51bn in the entire year. At $20 as predicted by the
IMF, Nigeria will generate $44m daily or $16.06bn next
year. This will mean that the country will get at least 47.4
per cent less revenue from oil than what is projected,
adding more pressure to the nation’s need to go borrowing
in 2016.
According to President Muhammadu Buhari, oil related
revenues are expected to contribute N820bn to the
economy, while the budget deficit, which is projected at
N2.22tn, will be funded by foreign and domestic loans.
If the N820bn expected from oil revenues is cut by 47.4 per
cent as a result of the IMF projected decline in oil prices,
the nation’s budget deficit will climb by N388.68bn to
N2.59tn.