By ADEWALE SANYAOLU
Fear that Nigeria may increasingly find it difficult to finance key capital projects including the machinery of state bureaucracy heightened further last week as her crude took a worst hit in the global oil market against the impressive run of new energy alternatives from across the world, including the US Shale gas may put the nation’s economy under severe pressure over the next two years.
Early signs of the shape of things to come manifested in the first quarter of this year when her crude projections were not met leading to huge revenue shortfalls for government.
Rattled by these ominous signs, President Goodluck Jonathan last week jetted out to China with his economic team in search of more benevolent development partners to help him cushion the likely impact of the low oil revenue to government.
As would be expected, the President aptly highlighted his administration’s concern over the development in the international oil market when last Thursday, during his state visit to Beijing, admittingthat; “Nigeria must urgently diversify its economy to survive in a world less dependent on fossil fuel”.
Nigeria and other OPEC states which depend on crude oil sales to the US and other nations to run her affairs are concerned about increasing utilization of alternative sources of energy such as shale gas,” Jonathan exclaimed.
This is so because the United States shale oil revolution is set to take a huge toll on Nigeria’s economy as the Organization of Petroleum Exporting Countries (OPEC) Wednesday, predicted that the world would need less of its crude in 2014 owing to competing supply sources.
When this eventually crystallizes, Nigeria which depend on crude petroleum sales to finance her activities may not be able to funds development projects and run her recurrent budget in the absence of a viable non-oil revenue stream.
Analysts who assessed the collateral impact of such development said it hit hard on the naira exchange rate, the Excess Crude Account and dry up her estimated $47billion foreign reserves within a few months.
At the moment, crude oil sales accounts for over 80 percent of the country’s source of revenue just as US remained the biggest market for Nigeria’s crude.
Shale gas is natural gas found trapped within shale formations and has become an increasingly important source of natural gas in the United States and the rest of the world.
Presently it provides over 20 percent of U.S. natural gas need and that figure is set to rise to 46 percent by 2035, according to the U.S. government’s Energy Information Administration.
At of today, more and more countries are resorting to shale gas while the demand for Nigeria’s oil and gas continues to drop by the day, with a corresponding dramatic slide in revenue government.
So far this worrisome trend has led to Nigeria’s crude oil production dropping in volume sold to around1.3 million barrels per day, as against the budget benchmark of 2.48 million barrels per day with price heading below $100 per barrel after hitting over $114 or more thus resulting in huge loss of revenue, a figure far lower than that seen during the height of the protracted militancy in the Niger Delta.
Recall that the Nigeria National Petroleum Corporation (NNPC), had on April 18 reported a drop in crude oil production in the first quarter of 2013, January to March, resulting in a loss of crude oil revenue of $1.23 billion (N190 billion).
What is more disturbing to managers of the nation’s economy is that the development may likely continue in the next few years since non oil sector of the economy cannot generate enough resources at the moment to meet her development financing needs.
Meanwhile, the Central Bank of Nigeria (CBN) has continued its defence of the naira using the country’s foreign reseres. This has so far resulted in a drop of about $1.5 billion as the reseres closed the week at $47 billion after hitting $48 billion several weeks back.
Group General Manager Public Affairs Division of NNPC, Tumini Green, NNPC said Daily crude oil production during the period fluctuated between 2.1 and 2.3 million barrels per day (mbpd) compared with the projected estimate of 2.48mbpd. “Expectedly, this fall between actual production and forecast in first quarter 2013 has resulted in a drop in crude oil revenue of about $1.23 billion (N$191 billion) that should have accrued to the Federation Account,” she explained.