As the Federal Government continues to foot-drag in signing the Petroleum Industry Governance Bill (PIGB) into law, the failure will act as a constraint on state oil revenues over the next 6-12 months. It would be recalled that after years of delays, the PIGB hit a new obstacle when President Muhammudu Buhari refused to sign the bill into law in September.
According to a Business Monitor International (BMI) report, shortfalls in VAT and other tax revenue indicated that non-oil revenues will also underperform. Spending pressures will remain high as the country heads towards highly contested elections in H119. “Over the longer term, weaknesses in the oil sector and the need to devote a greater proportion of revenue to servicing debt, could limit growth supporting spending”, it said.
The report revised its fiscal deficit forecast for 2018 from 3.1% to 3.3% of GDP—up from an estimated 2.8% in 2017, and almost double the government target of 1.7%. The upward revision reflects an increase in uncertainty in the oil sector following the failure to sign the Petroleum Industry Governance Bill (PIGB) into law. The BMI report is forecasting an overall deficit of 3.1%, up from 3.0% previously in 2019.
“From all indication, the latest delays to the PIGB will undermine operator confidence and constrain oil sector revenue. The PIGB forms part of government efforts to offset the maturing of existing fields, and includes new tax laws making it more attractive for oil companies to invest and re-invest offshore”, it said.