Positive OPEC deal outcome brightens Nigeria’s revenue prospects 

A recent Reuter’s survey released January 31 indicating that OPEC’s oil output is set to fall by more than 1 million barrels per day as the cartel implements its first supply cut deal in eight years raises hope that Nigeria’s January oil earnings may see an uptick.

Nigeria sorely needs improved earnings from crude oil as the commodity accounts for over 70 per cent of revenue and 90 per cent of the country’s foreign exchange earnings. The 2017 budget is based on a budget benchmark of 2.2million barrels per day at $44.5 per barrel.

Nigeria needs all the money it can get to spend out of a recession that saw inflation rise above 18 per cent year-on-year last month.

The Federation Account Allocation Committee (FAAC) disbursed the sum of N426.88bn to the three tiers of government in December 2016 from the revenue generated in November, almost N31billion lower than what was allocated in November.

The Organisation of the Petroleum Exporting Countries (OPEC) agreed to cut its output by about 1.20 million bpd from Jan. 1 along with non-OPEC members including Russia to prop up oil prices and get rid of a supply glut that saw prices crash below $30.

Reuter’s survey based on shipping data and information from industry sources showed that supply from the 11 OPEC members with production targets under the deal in January has averaged 30.01 million bpd, down from 31.17 million bpd in December.

Compared with the levels that the countries agreed to make the reductions from, in most cases their October output, this means the OPEC members have cut output by 958,000 bpd of the pledged 1.164 million bpd, equating to 82 per cent compliance.

Nigeria along with Libya and Iran secured exemptions from production cuts but militancy has rained on Nigeria’s parade.

As peace overtures are extended to the Niger Delta militants by the Federal government, analysts are optimistic output may yet incline northwards.

Analysts at Ecobank Energy research team last week forecasted that Nigeria’s average oil output will be 1.8m barrels per day in 2017 up by thirteen per cent from the 2016 averages.

The analysts identified three key factors likely to affect Nigeria’s output in 2017: militancy, low level of additional oil coming from new projects and the natural rate of field decline in most of Nigeria’s large fields.

“Despite several attempts by the government to engage in peace talks with the region’s militant groups, a lasting peace or ceasefire has not been negotiated clearly more needs to be done,” said Luke Doogan, analyst at research firm West Sands Advisory Limited.

ISAAC ANYAOGU