The new year looks promising for Nigeria and other oil producing countries as oil prices hit 18-month high yesterday, the first trading day of 2017, buoyed by hopes that a deal between the Organisation of Petroleum Exporting Countries, OPEC, and non-OPEC members to cut production, which kicked in on Sunday, January 1, 2017, will drain a global supply glut.
Benchmark Brent crude jumped more than 2.0 percent to a high of $58.37, up $1.55 a barrel and its highest since July 2015, while United States’ light crude oil hit rose to $55.24, up $1.52 a barrel, also its highest since July 2015. Though some oil traders indicated that the price surge would continue, a few were thinking such increases would spark off increased outputs from both non-OPEC members and United States’ Shale producers, a development which would upstage the cut back and bring a return of glut and price crash.
But at current price levels, Nigeria’s 2017 budget predicated on oil price benchmark of $42.5/ barrel is likely to hit a significant bridging of the N2.36 trillion deficit by extra oil revenue estimated at about N1.2 trillion should the price rise be sustained through the fiscal year.
In addition to the price surge, Nigeria is also benefiting from the OPEC deal which excluded the country from the output cut against the backdrop of militancy activities which had forced its output down to as low as 1.5 million barrels per day as at the time of the OPEC output cut talks.
With the exclusion clause for Nigeria and two other countries Nigeria is free to increase output while the OPEC deal lasts. Consequently, the Minister of State for Petroleum Resources, Dr. Ibe Kachikwu, has indicated that not only has output been progressively on the rise in the past three months, the target would surpass the 2.2 million benchmark fixed for 2017 budget indicating that this would combine with the increasing oil price to further boost Federal Government’s efforts in pulling the economy out of recession in 2017.