Budget deficit concerns as OPEC limits Nigeria’s daily oil output

The Organisation of Petroleum Exporting Countries (OPEC) wants Nigeria to keep its daily oil output at 1.8 million barrels which is 400,000 barrels less than the country’s benchmarked 2.2 million barrels per day in the 2017 budget.

This was disclosed in Russia on Monday after the Joint OPEC-Non-OPEC Ministerial Monitoring Committee (JMMC), following a review of the joint technical committee (JTC).

The meeting was hosted by the Russian energy minister, Alexander Novak, and had Mohammad Barkindo, the OPEC secretary-general and members of the JMMC in attendance.

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According to OPEC secretariat via a statement, the JMMC, having reviewed the report of the JTC, including the presentations made by the representatives of Libya and Nigeria on their production recovery plans, prospects, and challenges, acknowledged the upside limitations of both countries beyond their current production levels.

“Once their production levels stabilize, participating producing countries should further cooperate in a manner that contributes to the stabilization of the market.

“The JMMC will continue to monitor and recommend further actions including the holding of an extraordinary conference of the 24 producing countries if needed.

“The JMMC further welcomed the flexibility of Nigeria in this regard, which despite its commitment to recover its pre-crisis production level, voluntarily agreed to implement similar OPEC production adjustments as soon as its recovery reaches a sustainable production volume of 1.8 mb/d”, the statement read.

The committee reviewed the JTC report and noted that the oil market is making steady and significant progress towards rebalancing.

It noted that the continued strengthening of the global recovery is underway, with stability in the oil market remaining a key determinant. It also observed that market volatility stayed lower in recent weeks, as well as improvements in investment flows.

“According to the JTC report, there are several positive indicators going forward. Oil demand is expected to increase significantly in the 2H17 compared to 1H17, with the growth reaching a level of 2 mb/d, which should sustain the inventory draws.”

The secretariat added that the “participating OPEC and Non-OPEC producing countries achieved a conformity level of 98% in June 2017,” less than the over 100 percent recorded in previous months.

The JMMC noted that despite the high level of conformity at the aggregate level, there was still room for improvement at individual country level, and demanded that all participating producing countries must promptly reach full conformity.

Consequently, the JMMC had serious discussions with the said countries and promised to continue to engage with all participating countries individually, in order to achieve 100% conformity for the remaining period of the declaration of cooperation.

The fifth meeting of the JMMC is scheduled to take place in September 2017, or earlier if deem necessary.

This development adds more budget deficit concerns to Nigeria’s already notable budget deficit-challenged profile. As many experts have argued, over-reliance on the volatile oil market will remain a serious challenge to Nigeria’s sustainable growth objectives. They have thus advocated broad-based economic diversification at a rapid pace.

 

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