In May 2023, the Federal Government’s oil revenue target saw a significant drop from N804 billion to N223 billion, marking a substantial 72 percent reduction in federal earnings, as per statistics from the Central Bank of Nigeria’s Monthly Economic Report for May 2023.
According to the report; “oil revenue at N223bn for May was 36 per cent below receipts in the preceding month and below the monthly target of N804bn”.
According to the CBN, the notable decrease in oil revenue was primarily attributed to reduced income from Petroleum Profit Tax and Royalties.
The report also noted that gross federation earnings declined due to decreased receipts from both oil and non-oil sources.
The total federation revenue amounted to N837 billion, reflecting a 16 percent decrease from the previous month and a significant 53 percent shortfall compared to the budget.
Regarding the revenue sources, the report highlighted that non-oil revenues remained predominant, constituting 73.4 percent of the federation’s revenue during the assessment period.
Non-oil receipts reached N614 billion, showing a 5.4 percent decline compared to the previous month and a substantial 36 percent deficit relative to the set target.
The significant deficit was mainly ascribed to reduced collections from Company Income Tax, Value Added Tax, and Customs & Excise Duties, which can be attributed to the seasonal nature of tax return filings by businesses in Nigeria.
This report from the Central Bank of Nigeria follows a recent Reuters report indicating a consistent decrease in waterborne crude imports from the Organization of the Petroleum Exporting Countries and its non-OPEC partners into the United States over the past year. This trend has further limited supplies in the U.S. while bolstering other markets, including Europe.
Data from the data intelligence firm Kpler revealed that the average total U.S. crude waterborne imports in October stood at 2.47 million barrels per day, a decrease from 2.92 million bpd in September. This decline was primarily attributed to reduced shipments from OPEC+ producers, including Nigeria, Algeria, and Saudi Arabia.
Additionally, the CBN noted that earnings from crude oil were adversely affected by the drop in crude oil prices, which was exacerbated by the United States’ challenging debt situation.
It said: “Consequently, provisional data shows that crude oil and gas export receipts fell by 3.8 per cent to $4.06 billion, from $4.22 billion in April. A breakdown reveals that crude oil export receipts declined by 4.2 per cent to $3.58 billion, from S$3.73 billion in the preceding month. Similarly, gas export receipts fell by 2.1 per cent to $0.49 billion, from $0.50 billion in April.” Particularly, the bank noted that the average spot price of Nigeria’s reference crude oil, the Bonny Light (34.9° API), dipped by 11.16 per cent to $76.91 per barrel, from US$86.57 pb in the preceding month.
The report indicated a decrease in the prices of various crude oil types, with UK Brent at $76.95 per barrel, Forcados at $77.24 per barrel, WTI at $72.34 per barrel, and the OPEC Reference Basket at $75.70 per barrel.
Additionally, the Central Bank of Nigeria reported an increase in domestic crude oil production, reaching 1.18 million barrels per day, and an uptick in crude oil exports to 0.73 million barrels per day. This export increase was primarily a result of Exxon Mobil lifting a force majeure, which followed the resolution of an industrial action by the workers’ union.
“Of the 1.18 mbpd produced, 0.45 mbpd was allocated for domestic consumption, while 0.73 mbpd was exported. Nigeria’s production level remained below the OPEC monthly quota of 1.742 mbpd by 0.562 mbpd.”
The President of the Nigerian Association of Petroleum Explorationists, Elliot Ibie, shared in a conversation with The PUNCH that the nation has been encountering reduced crude oil exploration activities since the COVID-19 pandemic.
He emphasized that addressing issues such as security challenges, pipeline vandalism, oil theft, and the delayed implementation of the Petroleum Industry Act is crucial to stimulate greater investments in crude oil exploration. This, in turn, would contribute to an increase in exports and federal revenue for the country.