The news about Organisation of Petroleum Exporting Countries ( OPEC) capping Nigerian crude oil output at 1.77 million barrels per day (mbpd) following the new agreements reached by its members is expected to cost Africa’s biggest oil-producing country about 57,000barrels per day worth $3.3 million daily.
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Nigeria has been one of the largest overproducers and noncompliant OPEC members in the production cut deal this year at a time when the oil market continues to be oversupplied with rising U.S. production and faltering oil demand growth.
In a chat with Bloomberg TV, new Nigerian Minister of State for Petroleum Resources, Timipre Sylva said Nigeria is ready to make deeper oil cuts if necessary and would now adopt new quota of 1.774 million barrels a day after admitting the country overproduced in August.
With Oil price trading at $58, strict adherence to this new OPEC Quota means Nigeria oil is expected to lose about 57,000 barrels per day worth $3.3 million daily.
“Everybody agrees in OPEC that we need to stabilise the market. We cannot allow prices just to plummet,” Sylva stated.
The 2019 budget was signed by President Muhammadu Buhari in May, was based on oil production of 2.3 million bpd (including condensates) with an oil benchmark price of $60 per barrel although Bloomberg shipment tracking data said Nigeria bumped around 2.2 mbpd in August.
“We will cut across the assets. The OPEC quota is on crude production only, not on condensate, so it doesn’t affect the condensate,” Group Managing Director of the Nigerian National Petroleum Corporation (NNPC), Mele Kyari told reporters at a conference in Fujairah in the United Arab Emirates.
Iraq and Nigeria, two rogue members of OPEC that haven’t been complying with their share of the production cuts in recent months—pledged last month to fall within their respective caps while the cartel and its allies are trying to rebalance the oil market.
In August, Nigeria pumped 1.866 million bpd, up by 86,000 bpd from July, according to OPEC’S secondary sources that the cartel uses to calculate official production and compliance rates while Iraq has been pumping 4.8 million bpd in recent months instead of its target of 4.512 million bpd.
“I have had a series of meetings with the leadership of Nigeria and Iraq and they have assured me they will be faithful to their obligation,” Mohammed Barkindo, Secretary-general of OPEC, told Bloomberg TV. “There is no unilateral action that will be taken by both Nigeria and Iraq; I have been in contact with the countries.”
Nigeria’s government is struggling to generate more revenue to finance its growing budget amid unreliable oil revenue. The country’s debt has grown more than 160 percent to N24 trillion in the last five years. Tax to GDP remains low at 6 percent, one of the lowest globally.
Despite averaging more than 7percent in the first 14 years of this century, annual growth in Nigeria’s economy, which vies with South Africa as the continent’s largest, hasn’t managed to top 3percent for the past four years.
President Muhammadu Buhari, who was re-elected in February, pledged to diversify his country’s economy, which depends on oil for 90percent of its foreign exchange, making it vulnerable to global price movements.
