NIGERIA is facing a fresh additional revenue crisis after the petroleum ministry was forced reduce crude oil output to 1.32m barrels a day as part of its obligations to the Organisation of the Petroleum Exporting Countries (Opec).
Being a key member of the oil producers body Opec, Nigeria is compelled to adhere to its production quotas as the country is always party to setting them in the first place. With global crude oil prices in the doldrums as a result of weak demand, Opec has slashed its production quotas in an attempt to rally the market.
Historically, Nigeria has had an Opec production quota of 2.5m barrels a day but with everyone forced to reduce output in the wake of the Covid-19 pandemic, this has been halved to 1.3m barrels a day. With Nigeria’s 2021 budget predicated on selling 1.7m barrels a day at $40 each, this latest development spells trouble for the government.
According to the latest data from Opec, Nigeria’s oil output dropped from 1.34m in October to 1.32m barrels in November. Worldwide, Opec’s crude oil production averaged 25.11m barrels a day in November, up by 710,000 barrels from October.
Opec and its allies agreed in April to an output cut to offset a slump in demand and prices caused by the coronavirus crisis. They decided to cut supply by a record 9.7m barrels per day in May and June but the deal was extended in July by one month.
Members that did not implement 100% of their production cuts in May and June, including Nigeria, were asked to make extra reductions from July to September to compensate for their failing. According to Opec, during the course of November, crude oil output increased mainly in Libya and the United Arab Emirates, while production decreased primarily in Iraq.