Nigeria has missed out on an opportunity to improve its earnings as its oil production declined by 78,000 barrels per day (bpd) last December despite a current quest by some major oil producers to pump, the latest data from the Organisation of Petroleum Exporting Countries (OPEC) has revealed.
The country told OPEC that its oil output lost about 78,000 bpd, leading to 1.19 million bpd in December, according to the cartel’s latest report released on Tuesday, January 18, 2021.
OPEC uses secondary sources to monitor its oil output, but also publishes a table of figures submitted by its member countries.
According to secondary sources, Nigeria’s production decreased to 1.33 million bpd in December from about 1.38 million bpd in November 2021 compared to its OPEC quota of 1.61 million bpd.
In December, OPEC’s members added just 166,000 barrels a day, compared with a target of 250,000 a day, the report showed.
OPEC also kept forecasts for global oil demand and supply this year largely unchanged from last month’s report. The cartel expects global oil markets to remain “well-supported” this year by robust demand, maintaining the confident outlook that has allowed the group to revive production.
On Tuesday, the price of Bonny Light, Nigeria’s premium oil grade, surged further to $86.55, from $83.88.
“Essentially, Nigeria’s outlook remains influenced by the same old themes. If oil prices remain stable, foreign exchange currency reserves and government revenue will likely rise,” Lukman Otunuga, Senior Research Analyst at FXTM said.
Read also: Barkindo pegs OPEC crude demand forecast in 2022 at 28.8mb/d
Nigeria has not been able to get the full benefits of rising oil prices because a large portion of the revenues it gets from there are used in paying for huge petrol subsidies.
To put this in proper context, in the first 11 months of 2021, subsidy rose to N1.16 trillion, according to the latest data from the Nigerian National Petroleum Company (NNPC) Limited.
Indeed, as expected, it also significantly impacted NNPC’s remittances to the Federation Accounts Allocation Committee (FAAC) in the 11-month period, dropping by N1.78 trillion.
The subsidy spending, which NNPC usually terms under-recovery, showed that the national oil company spent N25.374 billion, N60.396 billion and N61.966 billion in February, March and April respectively.
In May, June and July, NNPC recorded under-recoveries or value shortfalls of N126.298 billion, N164.337 billion and N103.286 billion, adding that the shortfall stood at N173.132 billion, N149.283 billion, N163.709 billion and N131.4 billion in August, September, October and November respectively.
NNPC is currently the sole importer of the product into Nigeria as other marketers have stopped importing the commodity due to their inability to adequately access dollars for transactions.
President Muhammadu Buhari has fixed the first half of this year to remove the much-talked-about subsidy. With politics most times trumping policies in Nigeria, it remains to be seen his he will do that going into a massively important election year.
The huge subsidy figures have also ensured that the NNPC’s remittances to the federation account have dwindled massively since last year, as projected remittance by the company for the 11 months combined was put at N2.30 trillion, while it was able to pay N522.203 billion.
