By Adedapo Adesanya
After agreeing to a deal with the Organisation of the Petroleum Exporting Countries (OPEC) and its allies, Nigeria is complying to reduce the volume of its crude production to 1.41 million barrels per day in May and June.
The new output commenced on the first day of this month and it made Nigeria, which is Africa’s largest crude exporter and producer, to shove off about 23 percent or 417,000 barrels per day of its oil production daily for this month and the next.
OPEC and others led by Russia agreed in April to a record output reduction of 9.7 million barrels per day for May and June as the coronavirus pandemic has slashed demand and crushed oil prices by as much as 50 percent.
Nigeria, a signatory to this deal, is obliged to also take off its daily production quota so as to help rebalance the market, which faced its worst month in April, and affected revenue of the oil dependent economy.
Last week, Minister of Minister of State for Petroleum, Mr Timipre Sylva, confirmed that the country was complying to the deal and would continue to do so.
“The cut for Nigeria is about 417,000 barrels per day (bpd), which is about 23 percent of our production. And of course, as at the end of April, we have complied,” he said.
Even despite improved prices to the commodity in the past two weeks, Business Post reported that the Federal Executive Council (FEC) approved the downward review of the crude oil benchmark for the 2020 budget to $25 per barrel.
In the initial 2020 budget signed by President Muhammadu Buhari last year, the benchmark was set at $57 per barrel, but the twin shocks of the coronavirus pandemic and an oil price war crashed oil prices earlier in March.
This led the Federal Government to implement a new $30 per barrel benchmark, but with this new development, it may further experience decline in the country’s oil revenue, which contributes about 90 percent of the country’s exports, 30 percent of bank credits and 50 percent of fiscal revenues, putting the nation at risk.
