IMF/Okonjo-Iweala Bombshell: US Shutdown Threatens Nigeria’s Crude Oil Export

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The budget impasse in the United States of America (USA) which has led to the shutdown of its public sector, if prolonged further, poses a severe threat to Nigeria’s dwindling revenue from crude as the US would be unable to pay for its imports from Nigeria.
Nigeria is currently suffering declining revenue from crude oil due to the perennial problems of oil theft and pipeline vandalism, which has resulted in lower allocations and a whopping backlog on payments to the three tiers of government. The situation is creating an impasse between the federal government and the state governors.

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Though Nigeria’s export to the US halved in 2012 and have further fallen sharply in 2013, data from the US Energy Information Agency (EIA) indicated that Nigeria still exported as much as 31 million barrels of oil to the US in the first quarter (Q1) of 2013. The data further showed that Nigeria earned a total of $42 billion between January and June 2013 from its overall crude oil export.
According to data from the National Bureau of Statistics (NBS), Nigeria’s crude oil export generally declined 19 per cent in Q1 2013 compared to a year earlier due to developments in the international oil market and crude oil theft.
The country shipped 83 per cent of crude to Europe in April 2013 compared with just 30 per cent three years earlier as a result of US shale gas, according to data from the IEA.
Minister of finance and the coordinating minister for the economy Dr Ngozi Okonjo-Iweala yesterday said developments in the United States would create uncertainty in Nigeria’s economy.
International Monetary Fund managing director Christine Lagarde also said there would be negative consequences for Nigeria if the budget impasse in the US is not resolved. She said developments in the US, being the largest economy in the world, would rub off on other economies
Their comments confirm fears in some quarters that a prolonged shutdown in the US will deal a blow on Nigeria’s economy through the US’ inability to finance crude oil and gas imports from Nigeria.
In response to the dwindling oil revenues, the federal government has already slashed its budgets, indicating that the funds to be shared at the Federation Account Allocation Committee (FAAC) meeting for August would be based on the actual revenue collections as distinct from the budgeted component among the three tiers of government.
The federal government insisted that the move became inevitable given that the benchmark used for the 2013 budget was over-bloated and unrealistic to implement.
Also, the frequent augmentation from the Excess Crude Account (ECA) to make up for monthly revenue shortfalls was stopped.
However, the Nigerian National Petroleum Corporation (NNPC) has said the US government shutdown will not have significant effect on the country’s economy as oil export to the US has been at its lowest stage over time due to the US discovery of shale gas.
Speaking with LEADERSHIP on phone, the general manager, media relations of the NNPC, Dr Farouk Ibrahim, said the volume of oil exported to the US has gone down drastically over time because of shale gas and other discoveries.
“So this new development may not have significant impact on export to the US because the volume has gone down to the most insignificant level before now,” he said. “I can confirm that our export to US has been at a very low level; they have become energy-efficient.”
Speaking to journalists on the outcome of the meeting of finance ministers from the Commonwealth countries at the ongoing World Bank and International Monetary Fund meetings in Washington, Okonjo-Iweala said Nigeria looks forward to a quick resolution of the budget impasse in the United States, and, if not addressed, could lead to higher interest rates and yields of Nigeria’s Eurobonds.
Their comments confirm fears in some quarters that a prolonged shutdown in the US will deal a blow on Nigeria’s economy through the US’ inability to finance crude oil and gas imports from Nigeria.
However, Okonjo-Iweala said the Commonwealth was determined to mobilize resources locally to finance its commitments, while also focusing on growth, job creation and infrastructure.
She maintained that there was room for members of the Commonwealth to do more to close tax loopholes, block leakages and harness illicit funds and re-direct such funds into the formal sector of the economy.
The minister who spoke alongside Dr Denzi Douglas, Prime Minister St Kitts and Nevis, disclosed that that the Commonwealth countries have resolved to use their vulnerability to global economic developments and natural disasters as basis to ask for concessionary financing from the international financial institutions, a request he said the IFIs have received.
Dr Douglas said it was good reasoning to use high vulnerability as qualification for debt suspension and other concessions from the IFIs.
On tax administration in Nigeria and the Petroleum Industry Bill, Okonjo-Iweala said Nigeria was favourably disposed to passing into law the PIB, given the attendant benefits to both oil sector operators and the regulators, just as she disclosed that the Federal Inland Revenue Service in Nigeria had continued to double tax revenue, but stressed that there was room to do more.


Source: Leadership

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