OrderPaperToday – The major fundamental of the 2018 budget may have to be revisited as the Organization of Petroleum Exporting Countries (OPEC) has decided to cap Nigeria’s oil quota.
Nigeria and Libya had been initially exempted from the production reduction deal reached with OPEC and non-OPEC members set to expire by March 2018. The supply side control is the basic tool use by the cartel to control price of crude oil. Nigeria and Libya were exempted from the deal because of unrest in the two countries which has prevented them from optimal production.
Although the exact cap was not stated, the 2017 production capacity was hinted as the figure, which according to the State Minster of Petroleum, Ibe Kachikwu, stands at 1.75m barrel per day.
This is a significant difference from the 2.3 barrel per day proposed in the 2018 budget.
Kachikwu made this known when he spoke to Bloomberg on the sidelines of the 173rd meeting of the OPEC holding in Vienna.
“We’ve been asked to be disciplined, the word cut has not been used. We’ve resisted the word ‘cut’. The word ‘cap’ had been accepted by me a long time ago, Clearly, there is a continuing obligation to ensure that we do not just flood the market because of the exemptions we were given.
“There’s a lot more energy around bringing everybody to the ballpark, Nigeria is willing to be in that ballpark and contribute. Our contribution is fairly limited because we are still lacking in that capacity to reach the marks anywhere soon.”
He put Nigeria’s current production at around 1.75 million barrels per day, adding that a 1.8 million barrels benchmark was comfortable.
“Our current production is 1.75, we are still below the 1.8 that was the benchmark which is comfortable but you’re going to see a lot more pressure as we go into next year, Sometime late next year, we will probably see the capacity of Nigeria to do close to 2.3, 2.5.
It remains to be seen if the new emerging fact would reinforce the voices in the two chambers of the National Assembly which have called for a more realistic oil production benchmark. The projection of 2.3 million barrel per day was described in several derogatory terms by the lawmakers including strong words like “fictitious and imaginary,” “baseless” and “nonsense.”
During the debate on the general principle of the budget on Thursday in the Green Chamber, AbdulRahaman Shuaib (APC, Adamawa) called on the government to readjust the production projection and instead increase the oil price benchmark.
He said: “The oil benchmark is too low, OPEC is already considering capping Nigeria production, so I urge the government to reconsider the oil benchmark.”