Lagos, Nigeria — Nigeria's President Muhammadu Buhari announced Oct. 8 in his 2021 budget proposal to parliament a lower output target and expected oil price benchmark for next year, as the OPEC member braces for reduced revenues from its key industry.
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For the purposes of revenue calculations in the 2021 budget, the Nigerian government is assuming oil production of 1.86 million b/d, including condensate output of between 300,000 b/d and 400,000 b/d, and a benchmark oil price of $40/barrel, the president said.
This compares with a 2.3 million b/d oil output target set for this year by the government, although output up to June averaged just 1.88 million b/d.
Buhari said that following the crash in global oil prices earlier this year as the coronavirus pandemic spread around the world, the Nigerian economy -- which is already projected to contract in the third quarter -- could fall into its second recession in four years.
"Revenue generation remains our major challenge. The resulting global economic recession, low oil prices and heightened global economic uncertainty have had important implications for our economy," Buhari said.
NEW PETROLEUM LAW
Buhari used the budget presentation to urge lawmakers to pass the landmark oil reform legislation, the Petroleum Industry Bill (PIB), into law to stimulate much needed investment in the Nigerian oil industry.
"The enactment of this bill will boost confidence and attract further investments into our oil and gas sector, as well as increase revenues," the president said.
Buhari on Sept. 29 submitted to parliament the reworked draft of the PIB for consideration by lawmakers.
The bill provides that the state oil company NNPC be replaced with a new limited liability company to be named Nigerian National Petroleum Company Limited; the creation of an upstream regulatory commission; and the establishment of a midstream and downstream regulatory authority.
NNPC currently manages the Nigerian government's interest in joint ventures with foreign partners including Shell, ExxonMobil, Chevron, Eni and Total. They account for 90% of the West African country's over 1.8 million b/d oil output.
Buhari also revealed that the government would retain a presidential amnesty program for former Niger Delta militants, in order "to maintain the peace in the Niger Delta region for economic and social activities to thrive."
The introduction of the program in 2009 helped rein in militant activity that caused extensive damage to Nigeria's oil infrastructure between 2006 and 2009.
President Buhari also dismissed the idea that the government might reverse its decision to abolish fuel subsidies, despite continued protests by labor unions and rights groups.
After years of prevarication, the government announced Sept. 2 that it had fully deregulated the country's downstream oil sector, and that domestic pump prices for gasoline would be determined by market forces.
Nigeria had capped the pump price of gasoline -- which is bought on the wholesale market on a dollar-denominated basis -- at Naira 145/liter (40 cents/liter) since 2016.
The government paid the difference between the landing cost and the regulated pump price.
"The new petrol pricing regime has freed up resources that was allocated to subsidize petroleum products," Buhari said.