By Ayorinde Taiwo (SIWES student, Gate Way Polytechnic Saapade)
Federal Government oil revenue for May 2023 has seen a significant decline, dropping from N804 billion to N223 billion, marking a 72% reduction in federal earnings.
This data is sourced from the Central Bank of Nigeria’s Monthly Economic Report for May 2023, as reported by The PUNCH.
The report reveals that the oil revenue for May amounted to N223 billion, which is 36% lower than the previous month and falls well short of the monthly target of N804 billion.
This decrease in oil revenue is primarily attributed to reduced earnings from Petroleum Profit Tax and Royalties.
Both oil and non-oil receipts contributed to a decrease in gross federation earnings. Federation revenue for May totaled N837 billion, showing a 16% decrease compared to April and a substantial 53% drop compared to the budget.
Non-oil revenue sources continued to dominate, making up 73.4% of the federation’s revenue during this period. However, non-oil receipts were also affected, with N614 billion in May, a 5.4% decrease compared to April and falling 36% below the target.
This decrease can be attributed to lower collections from Company Income Tax, Value Added Tax, and Customs & Excise Duties, influenced by seasonality in tax return filings by businesses in Nigeria.
The CBN’s report is consistent with a Reuters report indicating that the United States’ imports of crude oil from OPEC and non-OPEC partners have steadily decreased over the past year, further tightening supplies in the U.S. while benefiting other markets, including Europe. U.S. crude waterborne imports averaged 2.47 million barrels per day in October, down from 2.92 million bpd in September, with reduced shipments from OPEC+ producers, including Nigeria, Algeria, and Saudi Arabia.
The CBN report attributes the weakening of earnings from crude oil to declining crude oil prices, exacerbated by the United States’ debt situation.
Provisional data reveals that crude oil and gas export receipts declined by 3.8% to $4.06 billion, with crude oil export receipts decreasing by 4.2% to $3.58 billion. Gas export receipts also fell by 2.1% to $0.49 billion.
The report notes that the average spot price of Nigeria’s reference crude oil, Bonny Light, dropped by 11.16% to $76.91 per barrel. Similar declines were seen in the prices of UK Brent, Forcados, WTI, and OPEC Reference Basket.
Additionally, the CBN reports an increase in domestic crude oil production to 1.18 million barrels per day, with crude oil exports rising to 0.73 million bpd due to the lifting of a force majeure by Exxon Mobil following the suspension of industrial action by the workers’ union. Nigeria’s crude oil production in May rose by 19.2% to 1.18 million bpd.
Despite these developments, Nigeria continues to face challenges in crude oil exploration, primarily due to security issues, pipeline vandalism, oil theft, and delays in implementing the Petroleum Industry Act.
Addressing these challenges is crucial to attracting more investment in crude oil exploration in the country.
