London - Africa’s top oil producer Nigeria is concerned that oil and gas prices could fall as more countries uncover reserves and sees the need to make plans to adapt to this new environment, its finance minister said on Thursday.
“We are worried, we are concerned, because obviously so many countries are discovering oil and gas so the supply will be increasing over the next few years and therefore we need to plan accordingly to make sure we have the necessary buffers in our own economy,” Ngozi Okonjo-Iweala told reporters during a visit to London.
She was speaking in the context of a domestic budget debate which has seen parliament press for the government to count on a higher oil price and save less of its current high revenues from the sector.
Oil makes up around 80% of government revenues in the Opec member country. The draft 2013 budget assumes a global oil price of $75 a barrel, up from $72 a barrel in 2012, but parliament has pushed to raise the benchmark to as much as $80 per barrel.
Money earned from oil over the benchmark price is deposited into a savings mechanism called the Excess Crude Account (ECA). Any increase in the benchmark price will therefore reduce savings and make Nigeria less resistant to oil price shocks.
“In terms of benchmark price, we strongly believe that $75 is the right benchmark for us, it will help us to build buffers,” Okonjo-Iweala said.
“The national assembly thinks differently. We are a democracy, they want to have it slightly higher (so) we’re in dialogue.”
The minister added that Nigeria was still considering issuing a Eurobond next year.
Nigeria has said over the past few months that it was looking at issuing an infrastructure bond worth up to $1bn in 2013, but without confirming whether it would go ahead with the plan or not.
“We are planning one, we are working hard on it, we have to gauge appetite out there and see what we can do, but yes we do have that in mind,” she said.
Nigeria issued a debut $500m Eurobond in January last year, which was 2.5 times oversubscribed.
“But I can tell you that we’re going, whatever the case may be, to maintain a tight fiscal stance.”