The Excess Crude Account, into which Nigeria saves the difference between the market price of oil and the budget benchmark to provide a cushion when oil prices fall has been depleted in recent times as oil revenues continues its slide.
The Federal Executive Council had earlier this week proposed $38 per barrel as the oil benchmark price for the 2016 budget, down from $53 this year.
The account, which stood at about $4.11bn in October 2014, dropped to $2.45bn in December that year, down from about $3.11bn in November. The balance in the ECA was put at $2.1bn in July this year.
Brent, against which most of the world’s oil, including Nigeria’s is priced, has fallen by more than 60 per cent in the past 18 months, putting pressure on oil-exporting countries.
The global benchmark fell below the $40-per-barrel mark on Tuesday for the first time in almost seven years due to oversupply. It later headed back above $40, at which it traded on Wednesday.
Nigeria, like other countries that rely on oil revenues, has seen its finances badly hit by the decline in oil prices, with crude trading below the country’s 2015 budget benchmark price in recent months.
The steep decline in oil prices had in March forced the National Assembly to settle for $53 per barrel as the benchmark price for the 2015 budget, down from $65 proposed by the Executive, which had to adjust it twice, from $78 to $73, and later to $65.
Goldman Sachs, one of the most influential banks in commodity markets, recently said that oil could fall to as low as $20 per barrel amid fears that the world is running out of storage capacity.
The Chief Executive Officer, Total, Patrick Pouyanne, had on Monday said he did not expect pressure on oil prices after OPEC’s decision last Friday not to impose a ceiling on crude output and keep production at high levels.
“OPEC’s decision was expected by the market. We don’t anticipate a recovery in 2016 (for oil prices), because in 2016, the growth in capacity will be larger than the growth in demand…I am not very optimistic for 2016,” he told reporters in Qatar.
With OPEC’s failure to agree on a new output quota at its meeting last week, allowing member countries to continue pumping more than 31 million barrels per day of oil, further swelling a glut that has lowered prices.