Nigeria may have earned over N318bn additionally in February as a result of the increase in crude oil price in the past one month.
At the virtual presentation of the 2021 Federal Government approved budget in January, the Minister of Finance, Budget and National Planning, Zainab Ahmed, had stated that Nigeria’s benchmark for crude oil price was retained at $40/barrel.
Since February this year, Brent, the oil against which Nigeria’s crude oil is priced, had traded at an average that was higher than $60/barrel.
It traded for $63.81/barrel on Thursday.
The commodity, which crashed to below $20/barrel during the second quarter of 2020, had rallied in price since this year, trading above $63/barrel for most part of February 2021.
Figures obtained from the Federal Ministry of Finance, Budget and National Planning on Thursday showed that it traded at $65.18/barrel, $66.71/barrel, $67.15/barrel and $66.26/barrel on February 23, 24, 25 and 26, respectively.
Trading at an average of about $60/barrel for the past 30 days, it implies that the Federal Government has been earning an additional amount of about $20/barrel when compared against the 2021 budget benchmark of $40/barrel.
Also, Ahmed had stated in January that crude oil production was projected to increase from 1.8 million barrels per day in 2020 to 1.86mbpd in 2021, as economies recover from recession, and moderated by OPEC+ quota agreements.
“Although Nigeria’s total production capacity is 2.5mbpd, current crude production is about 1.7mbpd, including about 300,000bpd of condensates, which indicates compliance with OPEC quota,” the finance minister had stated.
From the minister’s statement, Nigeria’s crude oil production without condensate would be 1.4mbpd.
With an additional $20/barrel income, when marched against a benchmark of $40/barrel, it implies that the government’s earnings in the past 30 days from the sale of 1.4mbpd crude oil, at an official exchange rate of N379/$, is about N318.4bn.
This implies that the Federal Government has been earning more from crude oil in the past 30 days than it projected in its 2021 budget.
Ahmed had also in January expressed hopes that the crash in oil prices would not extend beyond this year, although she observed that this had led to severe funding gap for government.
“There is significant fall in crude oil prices resulting into very huge funding gap for the government.
“This trend is projected to continue into 2021, hopefully, not beyond, as the pandemic continues to disrupt economic activities globally,” the minister had stated.
Meanwhile, operators in the oil sector told our correspondent on Thursday that although the rise in crude oil price meant more revenue for Nigeria, it would also cause further hike in the prices of refined petroleum products.
They noted that if not for the subsidy being incurred currently by the Nigerian National Petroleum Corporation, the price of petrol would have risen to more than N190/litre.
“The rise in crude oil price is good for the country in terms of foreign exchange earnings, but it is also leading to an increase in the cost of refined petroleum products locally,” the National Public Relations Officer, Independent Petroleum Marketers Association of Nigeria, Ukadike Chinedu, stated.
The international oil benchmark, Brent crude, surged by over five per cent on Thursday as the Organisation of the Petroleum Exporting Countries and its allies agreed to extend oil cuts by one month into April.
Brent crude, against which Nigeria’s oil is priced, jumped by $3.03 to $67.10 per barrel as of 8:30pm Nigerian time on Thursday.
OPEC and its allies, a group called OPEC+, held their 14th meeting on Thursday via video conference.
The meeting emphasised the ongoing positive contributions of the Declaration of Cooperation in supporting a rebalancing of the global oil market in line with the historic decisions taken in April 2020 to adjust downwards overall crude oil production and subsequent decisions.
OPEC said in a statement that the ministers noted, with gratitude, the significant voluntary extra supply reduction made by Saudi Arabia, which took effect on February 1 for two months, which supported the stability of the market.
The ministers also commended Saudi Arabia for the extension of the additional voluntary adjustments of one million barrels per day for April 2021, exemplifying its leadership, and demonstrating its flexible and pre-emptive approach.
“The ministers approved a continuation of the production levels of March for the month of April, with the exception of Russia and Kazakhstan, which will be allowed to increase production by 130,000 and 20,000 barrels per day respectively, due to continued seasonal consumption patterns,” the statement said.
The meeting reviewed the monthly report prepared by the Joint Technical Committee, including the crude oil production data for the month of February, and welcomed the positive performance of participating countries.
“Overall conformity with the original decision was 103 per cent, reinforcing the trend of aggregate high compliance by participating countries,” OPEC said.
The meeting noted that since the April 2020 meeting, OPEC and non-OPEC countries had withheld 2.3 billion barrels of oil by the end of January 2021, accelerating the oil market rebalancing.
The meeting extended special thanks to Nigeria for achieving full conformity in January 2021, and compensating its entire overproduced volumes.
The ministers thanked the Minister of State for Petroleum Resources, Chief Timipre Sylva, for his shuttle diplomacy as special envoy of the JMMC to Congo, Equatorial Guinea, Gabon and South Sudan to discuss matters pertaining to conformity levels with the voluntary production adjustments and compensation of over-produced volumes.
They agreed to the request by several countries, which had not yet completed their compensation, for an extension of the compensation period until end of July 2021.
The meeting urged all participants to achieve full conformity and make up for pervious compensation shortfalls, to reach the objective of market rebalancing and avoid undue delay in the process.
It recognised the recent improvement in the market sentiment by the acceptance and the rollout of vaccine programmes and additional stimulus packages in key economies.
The meeting, however, cautioned all participating countries to remain vigilant and flexible, given the uncertain market conditions, and to remain on the course that had been voluntarily decided and that had hitherto reaped rewards.