The 2023 budget call circular shows a decline in oil revenue to total revenue projected by the Federal Government (FG).
There has been a gradual decline in projected oil revenues that could mean an increase in other revenue streams to the government, which will ease the pressure on oil as the major source of revenue if the government can generate as expected from these other streams.
FG’s share of oil revenue expected to fund the 2023 budget is estimated at N1.86 trillion. This is less than the N2.19 trillion of the revised 2022 budget.
Though the nominal amount expected from oil revenue hovers around N2 trillion over the years, the percentage contribution to total revenue has declined.
Oil revenue proportion to total revenue from 2020 has been less than 30% although it constituted over 40% of the total expected revenue from 2010 to 2019, except in 2016, when it was 18.62%.
2011 had the highest proportion of oil revenue to total revenue of 70.1%. The last three years have an oil revenue to total revenue proportion of 25.18% in 2021, 21.97% in 2022, and 22.01% in the 2023 proposed call.
The oil revenue was estimated based on the volume of crude oil production estimate. The production process has been a major source of greenhouse gas emissions in Nigeria and globally.
Production estimates had been above 2 million barrels per day (mbpd) but it has dropped since 2020 to below 2 mbpd.
Production estimate output was1.8 mbpd in 2020 from 2.3 mbpd in 2019, 2021 was 1.86 mbpd and 2022 is 1.6 mbpd revised from 1.88 mbpd. In 2023, projected oil production is estimated at 1.69 mbpd.
About 431.87 kg of carbon dioxide (CO2) is emitted per barrel of crude oil. This, therefore, means that the more the output from crude oil production, the greater the amount of CO2 that will be emitted daily.
Based on the above estimate, CO2 emissions in the country have been above 950 thousand metric tons per day from 2011 to 2019, when production was above 2 mbpd.
2013 recorded the highest of these emissions, estimated at 1.088 million metric tons. 2012 and 2014 also had projected emissions of 1.071 million metric tons and 1.032 million metric tons per day.
The drop in estimated production below 2 mbpd has seen estimated emissions drop below 810 thousand metric tons per day.
In 2020, the estimated emission stood at 777.37 thousand metric tons per day. This increased to 803.99 thousand metric tons in 2021, then dropped to 690.99 thousand metric tons in 2022 revised estimate. 2023 production projection will emit about 729.86 thousand metric tons daily.
Reducing crude oil production will reduce CO2 emissions.
Clearly, less dependence on oil as a revenue source could improve the country’s chances of attaining zero-emission resulting from oil production and easing climate change issues.
However, if revenue from other sources are not generated as projected it will also mean less revenue for financing development and climate change initiatives will suffer. Unfortunately, this has been the case since 2015, the government has been unable to meet its non-oil projections over the years despite an increase in projections.
Tengi George-Ikoli of the Natural Resource Governance Institute (NRGI) stated that Nigeria’s major revenue source is oil. Nigeria requires revenues to invest in its energy transition to meet its energy needs and contribute to averting the climate disaster. Climate finance funds promised are as yet not forthcoming as committed by developed economies. As revenue dwindles, it reduces funds available for the country and the incentives to focus on climate aversion when development needs are so high.
The Senior Officer, Nigeria Program pointed out that the reduction in oil revenue likely also reduces the proportion of petro-dollars relied on to service foreign debts, which increases pressures on the Naira as demand for dollars outpaces supply. Production decline now is only a foreshadowing of things to come. As the global oil demand reduces, even less revenue will be forthcoming.
While the reduction in projected oil revenues and production appears at the surface to be good news for the environment, the impact of the loss in revenue could set climate initiatives even further back making vision 2060 less attainable.