Nigeria may have to amend its 2018 budget proposals following reported moves by the Organisation of Petroleum Exporting Countries, OPEC, to cap the country’s oil output at 1.8 million barrels per day.
Reuters reported that OPEC will debate whether to cap oil output from Nigeria and Libya, which have so far been excluded from supply cuts since the plan was put in place in 2016.
Two sources with knowledge of the matter told the news agency that the idea was to cap Nigeria’s output at 1.8 million barrels per day and Libyan at one million bpd.
The development runs contrary to the projection of the Nigerian government with regards to oil revenue and funding of the 2018 budget.
On November 7, President Muhammadu Buhari presented the 2018 budget of N8.612 trillion to the National Assembly.
Described as Nigeria’s biggest budget ever, the budget contained a projected oil output of 2.3 million barrels per day at an estimated price of $45.00 dollars per barrel.
Should the Thursday OPEC proposal sail through, the federal government may be forced to adjust its output estimate to the 1.8 million barrels per day; a decision that would significantly affect projected revenue and other figures contained in the budget.
The federal government has said it wants to ensure adequate implementation of the 2018 budget when passed unlike the 2017 budget, which has recorded implementation below 50 per cent. The government has, however, said the poor implementation of the 2017 budget was due to acute revenue constraints.
Although the Nigerian government has promised to ensure 50 per cent implementation of the 2017 budget by December, with plans to roll over the remaining 50 percent to 2018, many concerned stakeholders have expressed reservations about the plan.
Nigeria relies heavily on oil revenue to fund its budgetary allocations.
In 2016, the nation was hit hard by the sharp drop in global oil prices, a development that pushed it into its first recession in 25 years. It, however, recovered and slipped out of recession in early September, after contracting for five consecutive quarters.
Africa’s largest oil producer has so far been excluded from OPEC supply cuts, due to falling production amid unrest in the Niger Delta region. But following negotiations with some leaders of the region in recent months, the nation has enjoyed relative peace and impressive oil production in the region.
The 14-member OPEC meets on Thursday to decide whether to extend production cuts until the end of 2018.