L
LequteMan
Guest
According to the Managing Director, Afrinvest West Africa Limited, a research and investment advisory firm, Mr. Ike Chioke, Nigeria's 2015 doesn't reflect what is on ground, as accurately as it should. He said FG might have to borrow as much as N2tr in order to support the revenue deficit.
Speaking in an interview with the Punch, he says "the oil benchmark for the budget has been pegged at $65 per barrel of crude oil, but the price of oil is currently below $50 per barrel. Also, the consensus opinion from many analysts today suggests that the oil price is going to trade around $40 to $50 per barrel and may become the new stabilised environment."
"If you recalibrate the budget at say $45 per barrel, you will find out that we have a shortfall of N1tn in revenue. And that N1tn is a lot of drop from the oil revenue as well as the tax revenue coming from the oil sector of the economy. Without going into much too much of details, it is not a linear relationship between the drop in oil price and the nation’s revenue" he said.
"When the price drops from $100 per barrel to around $50 (bearing in mind that there is a cost of production that does not go down), the drop in government revenue is very significant; it could be as much as 70 per cent. This is because as the oil price is dropping, the cost of production is still flat. This has an impact on what the government will get from oil revenue and by implication the amount to be shared by the three tiers of government.
"This is why we feel that the budget is probably not reflective of what the current environment suggests. In the same budget, you see a domestic borrowing of N570bn, which is similar to what the government planned to borrow last year, although it ended up borrowing about N1tn.
"Given that we estimate about N1tn funding gap in the revenue, we estimate that there may be about N2tn additional borrowing this year to make up for the shortfall; but the government won’t put it there yet." he said.
#IkeChioke #Nigeria #Afrinvest #Punch
Speaking in an interview with the Punch, he says "the oil benchmark for the budget has been pegged at $65 per barrel of crude oil, but the price of oil is currently below $50 per barrel. Also, the consensus opinion from many analysts today suggests that the oil price is going to trade around $40 to $50 per barrel and may become the new stabilised environment."
"If you recalibrate the budget at say $45 per barrel, you will find out that we have a shortfall of N1tn in revenue. And that N1tn is a lot of drop from the oil revenue as well as the tax revenue coming from the oil sector of the economy. Without going into much too much of details, it is not a linear relationship between the drop in oil price and the nation’s revenue" he said.
"When the price drops from $100 per barrel to around $50 (bearing in mind that there is a cost of production that does not go down), the drop in government revenue is very significant; it could be as much as 70 per cent. This is because as the oil price is dropping, the cost of production is still flat. This has an impact on what the government will get from oil revenue and by implication the amount to be shared by the three tiers of government.
"This is why we feel that the budget is probably not reflective of what the current environment suggests. In the same budget, you see a domestic borrowing of N570bn, which is similar to what the government planned to borrow last year, although it ended up borrowing about N1tn.
"Given that we estimate about N1tn funding gap in the revenue, we estimate that there may be about N2tn additional borrowing this year to make up for the shortfall; but the government won’t put it there yet." he said.
#IkeChioke #Nigeria #Afrinvest #Punch