Senate passes 2018-2020 budget framework, raises oil price estimate

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Senate passed the government’s 2018-20 spending framework on Tuesday, raising its oil price assumption to $47 from $45 per barrel.

The higher oil price assumption “should not be overly problematic,” said Standard Chartered’s Razia Khan, given that the bank’s price estimate is $61 a barrel.

Brent crude, the global benchmark, was trading around $62.70 a barrel on Tuesday.

However, the new price assumption could hit efforts to accumulate foreign exchange reserves, as usually any earnings above the budgeted oil price will go into a government reserves account, Khan said.

Aside from the oil price assumption, all other details contained in the document were kept the same by lawmakers as the framework was approved by both the Senate and the House of Representatives.

Nigeria is Africa’s biggest oil producer and crude oil sales make up two-thirds of government revenue. In the second quarter Nigeria emerged from its first recession in 25 years which was largely caused by low oil prices and militant attacks in the Niger Delta energy heartlands.

The budget framework projects crude production of 2.3 million barrels per day for next year. It also forecasts Nigeria’s economy will grow 3.5 percent next year, 4.5 percent in 2019 and 7 percent in 2020.

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