Three foreign elections that could shake Nigeria’s oil fortune

Nigeria, Africa’s largest oil producer, sits on a wealth of 37.1 billion barrels of proved crude oil reserves, but its future prosperity isn’t solely dependent on drilling rigs and pipelines.

From Russia to Venezuela and the United States, a series of crucial elections will play a significant role in shaping the fate of Nigeria’s oil revenue, potentially shaking the very foundations of its petro-economy.

Russia

Russia’s parliament has formally set next year’s presidential election date for March 17. President Vladimir Putin said he would run again, a move that could keep him in power until at least 2030.

Although Putin, 71, has not yet announced his intention to run again, he is widely expected to do so in the coming days now that the date has been set.

Under constitutional reforms he orchestrated in 2020, he is eligible to seek two more six-year terms after his current one expires next year.

Two people have announced plans to run: former lawmaker Boris Nadezhdin, who holds a seat on a municipal council in the Moscow region, and Yekaterina Duntsova, a journalist and lawyer from the Tver region north of Moscow, who was once a member of a local legislature.

Having established tight control over Russia’s political system, observers said Putin’s victory is assured if he runs.

Under Putin, Russia’s export-focused, $ 2.2 trillion economy has ridden the sanctions wave better than either Moscow or the West anticipated when those opposed to the February 2022 invasion of Ukraine sought to punish and isolate Russia.

Russia has redirected exports to destinations such as China and India and used the opaque ownership of so-called shadow fleets of ships to circumvent the West’s oil price cap.

The above development meant Netherlands overtook India as the biggest buyer of Nigerian crude oil.

Data from the National Bureau of Statistics showed the Netherlands bought Nigerian crude oil worth N2.5 trillion in the first nine months of 2023, while India’s imports from Africa’s top producer were valued at N1.6 trillion.

Although Putin, 71, has not yet announced his intention to run again, he is widely expected to do so in the coming days now that the date has been set.

Under constitutional reforms he orchestrated in 2020, he is eligible to seek two more six-year terms after his current one expires next year.

Further findings showed oil prices, the lifeblood of Russia’s economy, are currently well above what Russia needs for fiscal security as a series of output cuts by Organisation Petroleum Exporting Countries (OPEC) and allies and the widespread circumvention of the West’s price cap are combining to boost oil prices.

Nigeria needs the oil price to rise and in the worst case, remain steady at any price above its revised budget benchmark of $77.96 a barrel to feasibly raise N7.69 trillion as oil revenue to partly finance the 2024 budget of N27.5 trillion.

The proposed oil revenue for 2024 is over three times the amount budgeted for 2023, which was about N2.23 trillion.

“Fundamentally, the price cap’s leverage is increasingly under threat,” KSE Institute said in its November review, referring to the West’s $60 a barrel cap. “In October, more than 99 percent of seaborne exports of Russian crude oil appear to have been sold above $60/barrel.”

Venezuela

Venezuela, the 10th largest producer in OPEC is planning its presidential elections by 2024 to choose a president for a six-year term beginning on 10 January 2025.

With the exact date unspecified so far, Venezuela’s government and a faction of the opposition formally agreed to work together to reach a series of basic conditions for the next presidential election. The government and the opposition said in a joint agreement, last month, that each side can choose its candidate according to its own internal rules.

The US eased sanctions on Venezuela’s oil sector in response to the deal reached between the government and opposition parties for the 2024 election. These sanctions were especially tightened back in 2019 under former US President Donald Trump.

“Let’s see the level of production to be added,” an OPEC+ source told Reuters. “Maybe it will be small quantities, so then we are unlikely to see a policy change.”

Another OPEC+ source said the production recovery will likely be gradual and there would be no impact on OPEC+ policy in the short term. “Excellent news for Venezuela,” said a third.

Venezuela’s production has been rising slowly in the last two years, OPEC figures show, although at 733,000 barrels per day in September it remains a fraction of the 2.4 million bpd the country produced in 2016.

USA

On November 5, 2024, the United States will have its election. All eyes will be on that election as it will be the last for the year. The winner will serve four years from their inauguration on January 20, 2025.

At least 11 Republican candidates have announced that they will try to win their party’s nomination to take on Democratic President Joe Biden in the November 2024 election. Few concrete policy pledges have yet been made public.

This election is crucial as rebounding oil prices, increasing exploration activities and a more strategic approach from shale oil producers in the United States (US) are reopening 2014 scars for Nigeria and some of the biggest oil producers in the world.

The Federal Government hopes to make N7.69 trillion as oil revenue to partly finance the 2024 budget of N27.5 trillion.

The resurging shale oil production will be scary for Nigeria and most Organisation of Petroleum Exporting Countries (OPEC) which went into recession after Shale caused a supply glut that sent oil prices crashing to a historic low in mid-2014, while also making the US the largest producer of the commodity.

US crude oil production set a record for the second month running as condensate production increased by 224,000 barrels per day (bpd) to 13.24 million bpd in September from August, according to the U.S. Energy Information Administration.

The Biden administration last year conducted the largest-ever sale from the Strategic Petroleum Reserve of 180 million barrels, part of a strategy to stabilise soaring oil markets and combat high pump prices.

The sale angered Republicans who accused the administration of leaving the US with too thin a supply buffer to adequately respond to a future supply crisis.