Subpar oil output and fiscal revenue

Oil revenue continues to disappoint in the context of targets set by the FGN. For the 13 months through to November, total oil collections (gross), as with the non-oil equivalent, did not once reach the pro rata budget figure of N640bn: the closest they came was N602bn in November. The take from domestic sales hit the modest target of N21bn each month, but that from petroleum profits tax (PPT) and royalties not once. After statutory deductions, these revenues are transferred to the federation account for distribution to the three tiers.


  • In the absence of any internally consistent, official data in the past three months, we will assume that annual production including condensates is running at +/- 2.0mbpd. We understand that industry investment of about US$30bn is required merely to maintain our assumed current level, let alone come close to the assumed average oil production of 2.30mbpd in the 2018 budget and the 2019 budget proposals.

  • A step-up to the FGN’s budget assumptions requires the passage of the petroleum industry bill. The passage can come in one or more separate bills but has to be in a form that the oil majors and other operators can live with. It will only come about if the FGN develops a good working relationship with the next National Assembly.

  • The current price for UK Brent/Bonny Light offers some headroom over the price assumption of US$60/b in the 2019 budget proposals. Geopolitics underpin the price (Iran, Venezuela etc), along with OPEC+’s discipline.
Federally-collected oil revenues (gross; N bn)

Sources: CBN; FBNQuest Capital Research


  • Political instability in the Middle East and elsewhere will continue to underpin the price. However, the rapid expansion of shale output in the US places a ceiling on the price. The US is already the largest producer globally, at about 12.0mbpd and the majors, led by ExxonMobil and Chevron, are now ploughing very large resources into shale, driving their breakeven price ever lower.

Our site uses cookies to enhance your experience. By continuing to browse, you agree to our Privacy Policy