tuale4u:
The IPOB guy did not understand the budget. let me help him explain.

1. The Federal government budget is the Budget of the federal government alone. Not the Budget of the country.
Thus from the Nigeria sharing formula, the Federal government takes about 54% of the total oil revenue accruing to the country (Nigeria Federation).

2. Most of the oil production in Nigeria are JV and PSC. Using the JV template, Nigeria (the federation not Federal govt) only owns 60% of the oil produced and the Oil companies owns the remaining 40% of the oil produced per day .

thus the 2.2 million per day, only 0.6*2.2million=1.32million belong to Nigeria (The federation).

Federal govt share (Potential) = 0.54*1.32million=712,800 per day.

3. The actual average production per day is about 80% of the Potential production
this is because of 20% shutdown for maintenance, unplanned shut downs, pipeline vandalisation etc.

Thus the Federal govt actual average production per day = 0.8*712,800=570,240.

4. Today the average cost of production per barrel in Nigeria is about $18 per barrel.
Actually some onshore field cost are as low as $10 per barrel while some deep offshore and shallow offshore cost are as high as $25 dollar per barrel. Today more than 60% of Nigeria crude are from Offshore. thus using an average cost of $18 per barrel is realistic.

Thus out of the $38 dollar per barrel price of oil, the net revenue to the govt is about $20 per barrel.

thus the expected revenue to federal government from direct sales of Crude oil in 2016 is:

= $20 *199naira/1$ *570240*366*billion/1000000000= 830billion naira


From my estimation the Federal government expected revenue from direct oil sales is about 830billion naira which is very close to 820 billion naira estimated from federal government.


However, this is not all the federal govt get from having oil in this country. The oil companies pay company tax in hunderds of billion of naira.
But the govt choose to call it company tax because other companies that are not oil companies pay tax too. However the company Tax of oil companies is about 85% of their profit. Thus of the about 1.5 trillion naira expected revenue from Company Income Tax (CIT), Value Added Tax (VAT), Customs and Excise duties, and Federation Account levies, about 50% of it are coming from oil companies.

egift:


You nailed it. Great detailed.

Soon some separatists will come explode their negativity all over this thread. God help Nigeria overcome all her challenges from within and beyond.

HEIR:
Good job tuale4u. But as porka state the FG takes about 60% of the production cost. Which means $18 per barrel production cost actually means $10.8 per barrel cost goes to FG. Shale guys produces at about $38, meaning there not breaking even at the moment.
DPR and NAPIMS review this regularly, checking each receipt and ticket(money changes hand though).
That was why NAPIMS informed all operators this year, to cut cost of production/operational cost cut down by 60%. As such all contracts were pruned down by 60%

Please input these in your calculations. I also learnt there are plans to reduce each contract cost further next year.
I TOTALLY DISAGREE WE WILL GET JUST 830 BILLON FROM CRUDE OIL SALES

HEIR:
Good job tuale4u. But as porka state the FG takes about 60% of the production cost. Which means $18 per barrel production cost actually means $10.8 per barrel cost goes to FG. Shale guys produces at about $38, meaning there not breaking even at the moment.
DPR and NAPIMS review this regularly, checking each receipt and ticket(money changes hand though).
That was why NAPIMS informed all operators this year, to cut cost of production/operational cost cut down by 60%. As such all contracts were pruned down by 60%

Please input these in your calculations. I also learnt there are plans to reduce each contract cost further next year.
I TOTALLY DISAGREE WE WILL GET JUST 830 BILLON FROM CRUDE OIL SALES

TonyeBarcanista:
Thanks OP for the detailed explanation

egift:


You nailed it. Great detailed.

Soon some separatists will come explode their negativity all over this thread. God help Nigeria overcome all her challenges from within and beyond.

ayokellany:


Please learn to respond to only intelligent comment on NL, it is not everyone on NL that is here to learn or as the capability to.

simpleseyi:


This is what I call technical knock out to the wailing wailer.

Yeske2:
Love this break down, thanks @OP.

FOLYKAZE:
This is restoration of Nairaland political section genius.

Nairaland was once a learning platform. A school and institution of learning. GEJ supporters almost killed this platform with their sentimental and biased estimations. Politics section was filled with hatred, bitterness, bigotry and intolerance. This section was nearly turned to rascals hub. But thank goodness. . . .tuale4u signalling the their is hope in the youth

roigr2012:
Thanks OP for the post. Very detailed. However concerning the 85% company tax, the oil companies don't pay the amount expected as tax because they are allowed to make certain deductions prior to declaring their profit which reduces the amount they pay eventually as tax

HEIR:
Good job tuale4u. But as porka state the FG takes about 60% of the production cost. Which means $18 per barrel production cost actually means $10.8 per barrel cost goes to FG. Shale guys produces at about $38, meaning there not breaking even at the moment.
DPR and NAPIMS review this regularly, checking each receipt and ticket(money changes hand though).
That was why NAPIMS informed all operators this year, to cut cost of production/operational cost cut down by 60%. As such all contracts were pruned down by 60%

Please input these in your calculations. I also learnt there are plans to reduce each contract cost further next year.
I TOTALLY DISAGREE WE WILL GET JUST 830 BILLON FROM CRUDE OIL SALES

tuale4u:


The IPOB guy did not understand the budget. let me help him explain.

1. The Federal government budget is the Budget of the federal government alone. Not the Budget of the country.
Thus from the Nigeria sharing formula, the Federal government takes about 54% of the total oil revenue accruing to the country (Nigeria Federation).

2. Most of the oil production in Nigeria are JV and PSC. Using the JV template, Nigeria (the federation not Federal govt) only owns 60% of the oil produced and the Oil companies owns the remaining 40% of the oil produced per day .

thus the 2.2 million per day, only 0.6*2.2million=1.32million belong to Nigeria (The federation).

Federal govt share (Potential) = 0.54*1.32million=712,800 per day.

3. The actual average production per day is about 80% of the Potential production
this is because of 20% shutdown for maintenance, unplanned shut downs, pipeline vandalisation etc.

Thus the Federal govt actual average production per day = 0.8*712,800=570,240.

4. Today the average cost of production per barrel in Nigeria is about $18 per barrel.
Actually some onshore field cost are as low as $10 per barrel while some deep offshore and shallow offshore cost are as high as $25 dollar per barrel. Today more than 60% of Nigeria crude are from Offshore. thus using an average cost of $18 per barrel is realistic considering also "carry agreement" (to be explain in the last paragraph) which Nigeria have with oil company.

Thus out of the $38 dollar per barrel price of oil, the net revenue to the govt is about $20 per barrel. (Selling price ($38) minus Cost price ($18) = $20)

thus the expected revenue to federal government from direct sales of Crude oil in 2016 is:

= $20 *199naira/1$ *570240*366*billion/1000000000= 830billion naira


From my estimation the Federal government expected revenue from direct oil sales is about 830billion naira which is very close to 820 billion naira estimated from federal government.


However, this is not all the federal govt get from having oil in this country. The oil companies pay company tax in hunderds of billion of naira.
But the govt choose to call it company tax because other companies that are not oil companies pay tax too. However the company Tax of oil companies is about 85% of their profit. Thus of the about 1.5 trillion naira expected revenue from Company Income Tax (CIT), Value Added Tax (VAT), Customs and Excise duties, and Federation Account levies, about 50% of it are coming from oil companies.

Also another reason the govt is not getting much more currently from Direct oil sales is because of "Carry agreement"
Most of the recent oil development and investment in the last ten years on JV contract are mostly done on "Carry agreement".

Carry agreement is the contract between the govt through NNPC and Oil companies whereby the Oil companies provide all the fund to invest in new field development (Instead of NNPC providing 60% of the cost), and then the companies recover their money by collecting part of the federal govt oil share over time. That means some of the oil that would have got to the Federal govt today have been collected by the federal govt ahead of time in the past. So they get less today.

tuale4u:


bro I don't agree with you on that.
oil contribution to Nigeria economy is not little but very massive.

Actually to the budget oil contribute about 1.5trillion (Including Oil company Tax (petroleum profit tax)).

note that the Budget is 6trillion and we are borrowing about 2trillion.

Thus the actual expected earn revenue is about 4trillion. of this 4 trillion, oil is contributing about 1.5 trillon. that is about 40% of the actual earnings.

we should diversify our economy. But that does not mean lookingdown on the massive contribution of oil to our economy.

duwdu:


Smart - and mature - thinking.

P34c3
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tinkinjow:
You tried but I'm not impressed. I noticed what you attempted to achieve from the outset was that #800bn + amount.

The 2.2m barrels is actually the average production. so don't reduce it to 80%. at peak periods I hv seen figures as high as 2.34mn.

The budget is not set against $20 but $38 so don't do ur calculation outside of what it is based on. You are not doing a review of what it should be but what govt presented.
Stop trying to justify everything a govt which I bliv u strongly support does because u ll rubbish urself in the process.
I know for sure you intentionally took the prices per barrel and the numbers of barrel down with the sole reason to mislead the public. Do ur calculation with the indices contained in the budget bill submitted by Ur almighty "do no wrong" Buhari.

I personally don't worry about their calculations but the idea of borrowing money to fund social welfare. Nigeria is about to enter her worst economic downturn if this goes ahead. U can quote me on this.

duwdu:
To whom/the mods it may concern:

Kindly move this topic to the front page (if not already before this post is completed,) to afford it/the world the exposure the original post along with the thread deserves.

Thanks in advance.

P34c3
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