With the price of Brent oil peaking at $70.46 per barrel on Tuesday from $68.50 a day earlier, there are strong indications that Nigeria’s deficit financing problem may be abated if the rising oil prices in the global market are sustained for weeks or months.
Industry analysts believe that at $70.46 per barrel, Nigeria could gain about $20/barrel improved revenues from its Bonny Light crude exports based on the $40/barrel benchmark and 1.86 million barrels a day of crude production approved for the 2021 budget.
However, the prospects of improved earnings may not be so bright as daily production output has been unstable with insecurity in the country, particularly in the Niger Delta region, has been worsening over the past months.
This is even as the Minister of Finance, Budget and National Planning, Mrs. Zainab Ahmed, had in March described the rising crude oil prices as “double edged sword” based on the fiscal authorities efforts to fully deregulate the downstream sector.
The marginal surge in the crude oil prices on Tuesday was sequel to the decisions taken at the 17th Organisation of Petroleum Exporting Countries (OPEC) and Non-OPEC Ministers Meeting (ONOMM), held on Monday to impact the volatile market.
The decisions, including the commitment of participating countries in the Declaration of Cooperation, (DoC), the gradual return of two million barrels a day (mb/d) of the adjustments to the market, the extension of the compensation period until the end of September 2021, as requested by some underperforming countries, has great potential for Nigeria’s budget efficiency this fiscal year.
The OPEC, in a statement after the meeting stated: “The Meeting noted the ongoing strengthening of market fundamentals, with oil demand showing clear signs of improvement and OECD stocks falling as the economic recovery continued in most parts of the world as vaccination programmes accelerated.
“The Meeting welcomed the positive performance of Participating Countries in the Declaration of Cooperation (DoC). Overall conformity to the production adjustments was 114% in April (including Mexico), reinforcing the trend of high conformity by Participating Countries.”
“In view of current oil market fundamentals and the consensus on its outlook, the Meeting reaffirmed the existing commitment of the participating countries in the DoC to a stable market in the mutual interest of producing nations; the efficient, economic and secure supply to consumers; and a fair return on invested capital.
“Reconfirmed the existing commitment of the 10th OPEC and non-OPEC Ministerial Meeting in April 2020, amended in June, September, and December 2020, as well as in January and April 2021 to gradually return 2 million barrels a day (mb/d) of the adjustments to the market, with the pace being determined according to market conditions.
“Reiterated the critical importance of adhering to full conformity, and taking advantage of the extension of the compensation period until the end of September 2021, as requested by some underperforming countries. Compensation plans should be submitted in accordance with the statement of the 15th OPEC and non-OPEC Ministerial Meeting.
“Reconfirmed the decision made at the 15th OPEC and non-OPEC Ministerial Meeting with regards to production adjustments for the month of July 2021, given the observed market fundamentals.”
“Emphasized the need to continue to consult and closely monitor market fundamentals and maintain the monthly OPEC and non-OPEC Ministerial Meetings until the end of the decision made at the 10th OPEC and non-OPEC Ministerial Meeting on 12 April 2020.”