$43 And 2016 Budget: No Happy New Year.

Forecast for next year is a very dark and gloomy economic climate for Africa. Nigeria and South Africa, the continent's two largest economies would have more bleak tunnels. Nigeria: The government is yet to start the patch work for how it will get and spend money next year. No budget proposal. There are at least two reasons for this. Exactly a year ago, Oil was down to $100 from a rosy $115--20. Its former government then put 2015 budget at a bench mark of $65 pb. Modest as that was compared to a more ambitious 2014 budget ($78) this year's budget is not working. Nigeria earns less than it spends as oil never got back to $60pb from a February low of $40 pb Today,in London, Brent,Nigeria's blend of oil, came down to $43 pb. The dollar has enjoyed a 7 month high against all major currencies ;almost at per with EURO. For Nigeria that does not, in practical sense, have a fiscal policy, plus the web of JP Morgan Bond index ,putting a budget together at $43pb is not easy. They are not used to that kind of austerity. With the loans that its various governments are gushing in, 2016 will be the hardest year for Nigeria. Nigeria cannot even be sure that the prices will not slump further. Demand will remain low because of a warm winter. OPEC is no longer a cartel. Iraq even sells for as low as $30 with the other Gulf States and Saudi Arabia adopting novel ways to sell what used to be very precious. The Maths is simple: $43 pb x 365 at 2 million per day( if Nigeria can drill and sell that) it means even its governors are right. No minimum wage. Here are some facts: West Texas intermediate( WTI) went below $40 on friday and speculators expect Brent to follow. The benchmark for January is $43 pb for Brent. It could be worse for Nigeria because it is a high cost producing nation..Which means a cut in production as iran floods the market. Venezuela's oil minister said on Sunday that OPEC cannot afford a price war. He also admitted that the price would be around $25 if current trends continue. For Nigeria it means more people will loss their jobs as companies close down. It would also lead to unrest. Above all, Nigeria's president, Mohammadu Buhari will fail on all his campaign promises.
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