There is possibility that the Federal Government will record a 36 per cent drop in budget execution if oil prices do not exceed the $80 mark, with analysts admitting that the nation may need the commodity to sell for $126 per barrel in order to balance the budget.
According to the International Monetary Fund, with Brent at $82 per barrel, only Qatar, Kuwait, and the United Arab Emirates will have adequate income to balance their budgets.
In a statement from Deutsche Bank, Nigeria needs oil at $126 to balance its budget, while Venezuela requires crude at $162.
Having less than three weeks to go before the Organisation of Petroleum Exporting Countries meets in Vienna and the sell-off in oil showing few signs of letting up, speculation is mounting that the group will take action to try to curb the decline.
Brent crude which is the yardstick for more than half of the world’s oil gained 53 cents to close at $83.39 on Friday and was down 28 per cent from a high of $115.06 in June on the London-based ICE Futures Europe Exchange. West Texas Intermediate oil rose by 74 cents to $78.65 on the New York Mercantile Exchange, but was down 27 per cent from its June peak.
OPEC disclosed that the world would require less of its oil for most of the next two decades than formerly estimated as the United States shale production grows. The cartel reduced every forecast for its crude through 2035 except next year.
Former President, Nigerian Association of Petroleum Explorationists, Mr. Afe Mayowa, said oil price will continually decline saying that from the just concluded African Oil Week he had in South Africa, they are all expecting it to decline as low as $75. It is going to pose a lot of challenge to many economies. It is really unfortunate, he said.
Bloomberg quoted Giovanni Staunovo, an analyst at UBS AG in Zurich, as predicting that OPEC would reduce output by 500,000 barrels a day at its forthcoming meeting. Such a move would help trigger a rebound in crude to a range of $90 to $100 a barrel, the analyst estimated.