OPEC Headquarters in Vienna, Austria

Nigeria faces tougher times as OPEC considers 2.7m bpd cut

* Implementation of N10.33trn Budget 2020 likely affected

Alexander Davis | ConsumerConnect

As the Organisation of Petroleum Exporting Countries (OPEC) considers reduction in crude oil output by about 2.7 million barrel per day (bpd) in an attempt to save the international oil market from the shocks of Coronavirus (COVID-19), Nigeria’s vulnerable economy also may face further challenges.

COVID-19 is a disease currently affecting tens of national economies across the globe. Agency report showed that that oil prices have fallen to a record low since the outbreak early this year with the Brent selling at $51.64 as of 6:00p.m Monday, February 2.

As regards the impact of the development on the country’s revenues and the Federal Government’s strategy to cushion the effect, Timipre Sylva, Minister of State for Petroleum Resources, said Nigeria would rely on the initiative of the oil cartel.

Through Garba Deen Muhammad, his spokesman, Sylva stated that the country would comply with any decision reached by OPEC in an attempt to mitigate the impact.

While the oil cartel would meet in Vienna later this week, Reuters reports that it could agree further oil production cuts even if Russia decides not to join.

Economists and other stakeholders in the oil and gas sector had predicted a bumpy road for Nigeria’s N146.96 trillion economy, insisting that prevailing realities at the international oil market could worsen the nation’s fiscal outlook, especially the implementation of the N10.33 trillion 2020 budget.

ConsumerConnect recalls that in the 2020 Appropriation Act, the Federal Government estimated oil sales to stand at 2.18 million bpd at a price of $57 per barrel, while the exchange rate is expected to remain N305 per US Dollar.

With the current realities, Nigeria may not achieve projected production as well as oil price.

Earlier last month, there were speculations that OPEC may reduce outlook by 600,000 bpd but sources said the group would consider a deeper cut of about 2.7 million bpd.

“Saudi Arabia wants to hold prices from falling, but Russia is still not agreeing. So the only way might be for OPEC to cut alone, which will not send a good signal to the market,” Reuters reported.

“There should be a cut; there is no other option,” the source stated.

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