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Nigeria’s 2023 budget Is In Jeopardy Due To OPEC’s Decision to Limit Oil Production

Nigeria’s oil production quota is set to decrease by 20.7 percent as a result of OPEC’s decision to cut global oil production by 1.393 million barrels per day. Under the newly agreed production schedule, Nigeria, as Africa’s largest economy, will have its daily quota reduced to 1.380 million barrels from January to December 2024.

Nigeria has struggled to meet previous production quotas, leading to a decrease in dollar proceeds from oil sales and an increase in stranded crude oil. This reduction in oil production imposed by OPEC will constrain Nigeria’s oil production and exports, with potential implications for government revenue, budget planning, and overall economic stability since oil is a major source of income for the country.

Recent data from the Nigerian Upstream Petroleum Regulatory Commission (NUPRC) reveals that Nigeria’s crude oil production in April 2023 reached its lowest level in seven months, standing at 998,602 barrels per day. This decline has been attributed to critical export terminal outages.

In comparison to February, Nigeria experienced a 23 percent decrease in oil production, dropping from 1.3 million barrels per day. On a year-on-year basis, there was an 18 percent decline from 1.21 million barrels per day. As a result, Nigeria lost its position as Africa’s largest oil producer to Angola in April, as its oil output decline surpassed that of its OPEC peers.

During the recent oil market meeting in Vienna on June 4, 2023, OPEC agreed to adjust the overall crude oil production level for OPEC and non-OPEC participating countries in the Declaration of Cooperation (DoC) to 40.46 million barrels per day, effective from January 1, 2024, to December 31, 2024. This decision will be distributed according to an attached table.

The Kingdom of Saudi Arabia has voluntarily committed to a cut of 1 million barrels per day starting in July. Additionally, reports indicate that the voluntary cut of an additional 1 million barrels per day in July, which can be extended, will continue the 500,000 barrels per day voluntary cuts until the end of 2024.

The UAE has also decided to extend its voluntary cut of 144,000 barrels per day until the end of December 2024, in coordination with the countries participating in the OPEC Plus agreement, which had previously announced voluntary cuts in April.

OPEC stated that the required production level for Congo and Nigeria may be revised to match the average production achievable in 2024, as assessed by specialized oil upstream organizations such as IHS, Wood Mackenzie, and Rystad Energy. This revision will be discussed at the next ONOMM meeting, which is expected to be held by the end of 2023. OPEC mentioned that Nigeria’s stated Production Plan in 2024 is 1,578,000 barrels per day, subject to verification. The final required production for 2024 will depend on the assessment by secondary sources and will be updated by June 2023.

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