Amid Oil Output Deficit, OPEC Cuts Spell Trouble for Nigeria’s 2024 Budget Financing

Emmanuel Addeh in Abuja

Following the Organisation of Petroleum Exporting Countries (OPEC), massive reduction of the country’s crude oil production for next year, Nigeria may need to seek new ways to finance its 2024 budget.

THISDAY learnt that though the talks leading to the decision to make deep cuts in Nigeria’s production on Sunday were ’difficult’, Nigeria and a handful of other African OPEC and its allies eventually agreed  to the OPEC decision.

Talks were delayed by at least three and a half hours due to members’ discussions on the sidelines of production baselines, from which cuts and quotas are calculated, sources said.

OPEC’s most influential members and biggest Gulf producers led by Saudi Arabia persuaded under-producing Nigeria and Angola to have more realistic output targets, a source told Reuters.

With the agreement to produce 1.38 million barrels per day next year, THISDAY can report that Nigeria could have a difficult time funding its next year’s expenditure as it already has a high budget deficit of N12.1 trillion this year, even with a production quota of 1.742 million bpd which it has been unable to meet.

As of April, the country under-produced to the tune of 58 million barrels according to a recent THISDAY analysis of data from the Nigerian Upstream Petroleum Regulatory Commission (NUPRC).

While the country has a benchmark oil production of 1.69 million bpd for the year, Nigeria has barely managed to produce 70 per cent of that figure between January and April. OPEC leaders therefore argued that Nigeria must face reality and agree to lower its production baseline to stabilise the oil market.

This year, Nigeria’s crude oil benchmark is $75 per barrel, and the federal government is struggling to fund the budget. Before the OPEC decision on Sunday, the hope was that the country should be able to reap more from its oil production next, having already lost about two years to low production.

Nigeria’s crude oil production fell to a seven-month low of 998,602 barrels per day in April, a blow to recent gains made from the renewed efforts by the federal government to tackle oil theft and pipeline vandalism in the Niger Delta.

Although Nigeria maintains that it will augment production for next year with condensates, which are outside OPEC production, it is unclear how that figure will make up for the 2 million barrels per day NNPC’s production projection for next year.

Nigeria’s delegation to OPEC stressed that the country’s output will now be hinged on its highest volume in the last six months which is 1.38 million barrels per day, a far cry from the massive output expected next year.

“Nigeria alongside other OPEC and Non-OPEC members at the Joint Ministerial Monitoring Committee (JMMC) meeting agreed to cut production volumes in order to ensure global oil market stability.

“Nigeria, Congo and Angola have agreed that the highest production volumes of the last six months (November 2022 – April 2023) be used as the basis for the determination of their 2024 production quota,” a statement from the Vienna delegation added.

It stressed: “This will be complimented by condensate of about 400KBD. This will ultimately enable Nigeria’s crude oil and condensate production of about 2 million barrels per day in 2024.”

Nigeria and Angola have long been unable to produce in line with their targets but have opposed lower baselines because new targets could force them to perform real cuts.

It wasn’t clear why Nigeria which last year was asking for a higher baseline suddenly decided to settle for a lower one of 1.38 million barrels per day for 2024.

If the renewed efforts to end oil theft in the Niger Delta continues, production may likely hit 2 million in 2024, but the agreed OPEC cuts could pose a hindrance to this aspiration, THISDAY learnt.