By Adewale Sanyaolu
NIGERIA may be on the verge of increasing its N1.84 trillion domestic and foreign borrowing as oil price fell to 11 year-lows hitting $32.64 last week.
The development may have signified further setback for the country’s N6.08 trillion budget proposal, which was benchmarked on $38 per barrel.
With the Managing Director of the International Monetary Fund (IMF), Ms Christine Lagarde, foreclosing any form of financial support for Nigeria in the face of obvious financial constraints, analysts believe the only option left for the Buhari administration was to increase the size of its borrowing to make up for the difference between the benchmark and the current price of oil even though the slide is continuing.
Lagarde was on a four-day visit to Nigeria said she was not in the country to negotiate loans with conditionality. She stated, however, that Nigeria does not need IMF loan but fiscal discipline to achieve sustainable growth. She said, “let me make it clear that I am not here (in Nigeria) nor is my team in this country to negotiate a loan with conditionality. We are not into programme negotiations and frankly, at this point in time, given the determination and resilience displayed by the President and his team, I don’t see why an IMF programme will be needed.
“So, of course, discipline is going to be needed. Of course, implementation is going to be key for the objectives and the ambitions to serve the country well, in order for it to be actually sustainable.”
Under the 2016 budget proposal, the Federal Government is projecting a domestic borrowing of N984 billion and foreign loans of N900 billion.
Reacting to latest slide in crude oil price, President of Nigeria Liquefied Petroleum Gas Association (NLGPA), Mr. Dayo Adeshina, said Nigeria was over ambitious when it pegged oil price benchmark at $38 in the 2016 budget proposal.
‘‘I would have expected the country to peg the oil price benchmark at $30. But now that the price is less than $33, that means we will have to increase our borrowings,’’ he said.
Asked if the borrowing would be sourced locally or internationally, he replied: “I believe you heard what the IMF President said concerning support for the country, so it is left for the managers of the economy to determine where the revenue will come from.”
Adeshina, however, advocated that government should pursue the implementation of the gas master plan aggressively, if it was serious about shoring up its revenue base, saying gas has the potentials of turning around the fortunes of the economy.
Meanwhile, oil prices have fallen by around 70 per cent since mid-2014, hurting oil companies and governments that rely on crude revenue.
Brent fell more than 5 per cent to a low of $32.16 before paring some of its losses. US crude futures hit a low of $32.10, their lowest since late 2003, before bouncing slightly to $32.72.
Prices trimmed early losses, with violence in the Middle East and North Africa offering a measure of support for the market. However, oil’s rapid fall has met a prediction that Goldman Sachs made last year that crude could fall as low as $20 per barrel seem less outlandish than it then was. Last Wednesday, US government posted data that showed a 10.6-million-barrel surge in gasoline supplies, the biggest weekly build up since 1993.Analysts said further builds in global inventories are possible, putting more pressure on prices.