Nigeria’s vulnerable economy may face further challenges following plans by the Organisation of Petroleum Exporting Countries (OPEC) to reduce crude oil output by about 2.7 million barrel per day (bpd) in an attempt to save the market from the shocks of Coronavirus.
Oil prices have fallen to a record low since the outbreak early this year with the Brent selling at $51.64 as at 6:00pm yesterday.
Asked on the impact of the development on the country’s revenues and the leeway by the Federal Government to cushion the effect, the Minister of State for Petroleum Resources, Timipre Sylva, told The Guardian that Nigeria would rely on the initiative of the oil cartel.
The minister’s spokesman, Garba Deen Muhammad, 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.
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 dollar. With the current realities, Nigeria may 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 quoted a source saying.
The news agency reported another to have said: “There should be a cut, there is no other option.”