Let me tell you – the biggest risk in Nigeria as we enter 2019 is not the national election. People, if oil price continues to go south, Nigeria could see massive dislocation where even public sector workers may go months without salaries. Our 2019 national budget was anchored on $60. Today, oil is $46.
President Muhammadu Buhari has presented an N8.8trn budget for 2019.
According to the president, who gave the figure Wednesday during the 2019 budget presentation before a joint session of the National Assembly, the amount is higher than the N8.6 initially proposed.
The budget is predicated on $60 per barrel of oil benchmark at 2.3m litres per day, a GDP growth rate of 3.01 percent and inflation rate of 9.98 percent.
According to President Buhari, NNPC has been directed to take all measures to achieve the targeted 2.3m oil output per day.
But get the problem: the oil gods, legends who used to predict oil movements, are incapable now because oil is now produced from many channels, beyond OPEC, for them to model price points. Yes, unlike in the past where knowing the production volume of few countries and putting all into global GDP growth, manufacturing indices, etc, you can say oil will be $AB price. Today, some men in Oklahoma are pumping oil and no oil can track them. So, like how Internet works on digital distribution, the entry points have been unbounded, tripping markets. Supply glut is here and managing it is moving away from the powers of OPEC.
The bear market in oil keeps getting worse as worries about global growth and a supply glut ratchet higher.
US oil prices plummeted 7% on Tuesday to settle at $46.24 a barrel. It was crude’s weakest close since August 2017.
The deepening downturn in the oil patch is yet more evidence of investors fleeing risky assets as they brace for an economic slowdown. The same growth jitters that are rocking Wall Street — the Dow and S&P 500 are on track for their worst December since 1931 — are infecting commodities. Small-cap stocks plunged into a bear market on Monday.
Few days ago, the DG of the Budget Office challenged government institutions to re-double efforts on revenue collections in Nigeria. They need that because if Nigeria cannot improve revenue collection, next rainy season would be challenging.
It is a fearful trajectory – I am worried. I hope Mr. President and his teams are watching because his 2019 budget is already off by 20% and we are not even in 2019 yet. That “emergency” declared by the DG of Budget Office and Mr. President’s admission that the economy is in “bad shape” are reasons why everyone must put the country first. We need to deal with our over dependence on oil – that nation’s weakest link – in this generation. But we need to survive rainy season of 2019, hoping that shale gas entrepreneurs would have distractions.