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2016: Oil prices may fall to $20, IMF says
Nigeria may still go borrowing in 2016 to shore up its revenue, and finance its budget as the International Monetary Fund (IMF) Thursday predicted that crude oil prices may slump to as low as $20 per barrel in 2016.
The recent budget presented by President Muhammadu Buhari benchmarked oil price of $38 per barrel for the 2016 fiscal year, and with Nigeria expected to produce 2.2 million barrels of crude oil per day in 2016 and sell at $38 per barrel, the country expects to generate $83.6 million per day in 2016, amounting to $30.514 billion in the year 2016.
But going by IMF’s predictions at $20, Nigeria would generate $44 million per day in 2016, amounting to $16.060 billion in the year, which means that Nigeria would get at least 47.4 percent less revenue from oil than is already projected, consequently adding more pressure to the nation’s need to go borrowing in 2016.
Following the release of the “IMF Executive Board Concludes 2015 Article IV Consultation with Iran” report, the body highlighted that the price of crude oil could drop between $5 and $15 in 2016. According to IMF, the dwindling oil prices would not have overtly negative effect on Iran, whose gross domestic product (GDP) is expected to rise four to 5.5 percent by 2017.
Read also: Kaduna refinery begins supply of 3.2million litres of petrol daily
According to President Muhammadu Buhari, oil related revenues are expected to contribute N820 billion to the economy, while the budget deficit which stands at N2.22 trillion would be funded by foreign and domestic loans.
If the N820 billion expected from oil revenues is cut by 47.4 percent – the IMF projected decline in oil prices – the nation’s budgetary deficit would move N388.68 billion to N2.59 trillion.
The IMF prediction is against the Organisation of Petroleum Exporting Countries (OPEC) projections that the global crude oil prices at seven-year low will not continue to fall, as it could swing upwards soon.
The Secretary-General, OPEC, Abdullah al-Badri, made this disclosure at the first OPEC-India Energy dialogue in New Delhi.
According to him, “I’ve been in the oil business all my life. I saw six cycles – I saw very high price, I saw low price, and this is one of them. This will not continue.”
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