With plummeting commodity prices, forecasting becomes crucial for informed decisions.
Niger, rich in uranium and a recent oil producing country, faces a major challenge with falling commodity prices. The latest EITI Report, covering 2012, offers a guide to evaluate the impact that price fluctuations will have on the government budget.
Oil is driver of revenues in 2012
The extractives sector is one of the country’s main industries, accounting for 10% of GDP. The sector has experienced a significant expansion from US $120 million in 2011 to US $340 million in 2012. 2012 was the first full year of oil production which accounted for a little over half of the extractive revenues. The oil was mainly sold as fuel to the domestic market, with a little exported.
The 2012 report not only shows the revenues from the extractives sector, but also contains information on profit oil and tax oil, explains state involvement in the extractives industries and includes detailed information on the state-owned refinery Zinder. This oil refinery started operating in November 2011, but was forced to shut down temporarily due to a lack of storage facilities and regulations on the sale and export of the products.
Ambitious plans, but are they feasible?
In its report, the government sets out ambitious plans to up the country’s production of oil. These plans comprise a threefold increase in production from 20,000 barrels per day (BPD) to 60,000 BPD through additional fields in Agadem; the construction of a pipeline connecting Niger to the existing Doba (Chad) to Kribi (Cameroon) and the use of full refining capacities at Zinder of 20,000 BPD.
However, after concluding contract negotiations marked by historically low uranium prices, the ambitions of the government of Niger in the petroleum sector may also need to be revised due to the collapsing oil prices.
Running macro-economic scenarios
The report explains that the budgeting process in Niger includes the annual elaboration of three macro-economic scenarios that are developed into a budgetary framework for the National Budget. The 2012 EITI report should help inform these projections of revenue from the extractives sector for the coming year, and thus inform decisions on public spending.