Nigeria to stop sharing oil windfall savings as revenues drop

Feb 16, 2009 01:00 AM

Nigeria has halted further sharing of the savings from previous oil windfalls with the country's three tiers of government, following dwindling oil revenues that may also lead to delayed execution of some oil and gas projects, government sources said.
The drop in oil receipts coupled with declining oil production have seen foreign reserves plummet to a 10-year low of $ 4 bn compared with $ 60 bn in the same period in 2008, the sources said.

"Hard times are indeed here in the country because of the continued drop in oil revenue. The federal government has directed that the states will no longer [get a] share from the excess crude oil account to augment their monthly allocations," a source said.
"They [states] will have to make do with the regular income because the government will no longer dip into the excess account to augment the allocation to the states," the source added.

At the height of the boom in the international oil market when prices hit $ 147/bbl in July last year, Nigeriarecorded an oil windfall in excess of over $ 30 bn and foreign reserves ballooning to $ 63 bn as of October 2008. Oil prices are now hovering around $ 40/bbl, while Nigeria set its 2009 budget based on an oil price benchmark of $ 45/bbl.
"The sad thing about it is that we didn't benefit that much when oil prices were very high because the country was not producing to its capacity due to the Niger Delta crisis," another source said.

LNG projects face delays
Nigeria's central bank earlier warned that the country's economic growth in 2009 would be slowed by the global financial crisis and falling oil prices. President Umaru Yar'Adua on February 11 announced plans to cut the salaries and wages of all ministers and political appointees in a bid to save costs.
Sources said the cost-cutting measures could also delay execution of some key oil and gas projects, including the Brass LNG and OK LNG projects.
"We are studying the country's financial situation and the global recession to make surethat it does not affect our programs and projects as much as we can," a source at the Ministry of Petroleum said.

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