Economy
OPEC Mulls Further Cuts: What Does This Mean for Nigeria?
By Adedapo Adesanya
One of the greatest challenges currently facing the Nigerian economy is the dwindling prices of crude oil, which, using the Brent Crude standard, traded around the $54 dollar mark, $3 below the $57 per barrel benchmark set in the 2020 Budget.
Already, the country is faced with challenges regarding the contribution of the commodity to the country’s revenue and the new talks about the possibility of further production cap by Organisation of the Petroleum Exporting Countries (OPEC) on its members, including Nigeria, may further worsen the situation for Africa’s largest oil producer.
OPEC is considering this new measure as a result of the effect of the deadly coronavirus on prices of crude oil at the global market. It is believed that if the volume of crude oil production is reduced, prices will pick up again.
At the OPEC meeting with allies led by Russia in Vienna, Austria in December last year, Nigeria had pledged with other members of the cartel to contribute to the 500,000 barrels per day cut to bring down production to 1.7 million barrels till the end of March.
However, with the continuous impact of the coronavirus from China, one of Nigeria’s crude destinations, it is evident that there might be more aggressive oil output cuts of up to one million barrels than previously considered, after reviewing new data on Tuesday that showed coronavirus’ deepening impact on global oil demand, officials at the cartel said.
The impact would be felt by Nigeria if oil prices don’t go up to at least $65 despite cuts because this would mean that at the current 1.774 million barrels per day (bpd) cap, Nigeria may be forced to produce lower volume of oil, which could lead the country’s economy into another recession and shortage of foreign exchange, which is affecting the nation’s external reserves, currently below $38 billion.
In the 2020 budget, Nigeria put its average crude oil production at 2.18 million barrels per day at $57 per barrel.
Market analysts noted that OPEC and a 10-nation group of allies led by Russia had initially considered cutting 500,000 barrels a day, but a handful of scenarios up for discussions at the gathering on Tuesday foresee a need for much larger production cuts.
The virus, which originated in the Wuhan City of China last year, has already contributed to a sharp decrease in demand for crude, driving oil prices further down the budget cap of many countries, and with this OPEC officials are set to issue recommendations at the meeting scheduled for both Tuesday, February 4 and Wednesday, February 5. Following whatever recommendation is given, a final decision then would come after OPEC and its allies meet next week.
On Tuesday, OPEC’s research department presented two models with different estimates of how the virus may affect oil consumption. According to the models, the worst-case scenario estimated that if the virus lasts for six months, this could lead to about 400,000 barrels a day of demand, before a market rebound to pre-virus growth levels in the second half of the year.
However, if the cartel were to maintain its current output reductions throughout that period, there would be a surplus of 600,000 barrels a day in the first quarter and 1 million in the second, the analysis showed.
While a recommendation has not been reached, oil prices on Wednesday morning have resumed pointing north with the Brent Crude closer to $55 per barrel while and the US West Texas Intermediate (WTI), which fell below $50 was trading at $50.45 per barrel.
By Adedapo Adesanya
Aradel Holdings Plc is set to commence production of Premium Motor Spirit (PMS) at its modular refinery in 2027, following the removal of fuel subsidies and the deregulation of the downstream petroleum market.
According to Aradel’s general manager of refinery, Mr Temitayo Ogunbanjo, the removal of government control over fuel prices had created an opportunity for the company to begin manufacturing petrol.
Speaking on the sidelines of a conference in Abuja, Mr Ogunbanjo told Bloomberg that the company’s 11,000 barrels-per-day modular refinery currently already produces kerosene, diesel, gas oil and naphtha.
He noted that the deregulation of the downstream petroleum market has now created a pathway for Aradel to commence gasoline production at its refinery.
He added that Aradel is also considering an expansion of the refinery, with the company assessing potential crude supply sources and export logistics as part of its plans.
The company’s integrated operations across crude oil production, refining and distribution have benefited from recent volatility in global oil markets triggered by the US-Iran war, he told the publication.
Mr Ogunbanjo also disclosed that Aradel is considering investments in aviation fuel production, as the product has emerged as an important export to the European market.
The planned petrol production is expected to further expand Aradel’s refining operations as Nigeria’s downstream petroleum sector adjusts to the post-subsidy regime and increased private-sector participation.
It could also mean competition for other dominant refiners and importers, particularly the 700,000 barrels per day Dangote Refinery. Data from the Nigerian Midstream and Downstream Petroleum Regulatory Authority (NMDPRA) showed that Dangote supplied 87.55 per cent of Nigeria’s petrol demand in May 2026.
By Adedapo Adesanya
The decline in the share price of Central Securities Clearing System (CSCS) Plc weakened the NASD Over-the-Counter (OTC) Securities Exchange by 1.02 per cent on Wednesday, August 12.
The securities depository company suffered a N10.88 loss to close at N106.00 per unit compared with the previous day’s N116.88 per unit.
As a result, the market capitalisation, for the third time this week, closed lower, losing N28.04 billion to finish at N2.720 trillion compared with the N2.748 trillion it ended a day earlier. The NASD Security Index (NSI) dropped 46.71 points to end at 4,532.03 points versus Tuesday’s 4,578.74 points.
Yesterday, there was a price gainer, which was FrieslandCampina Wamco Nigeria Plc. Its price increased by N13.50 to N170.00 per share from N156.50 per share.
The level of activity for the session waned on Wednesday, with the volume of securities down by 89.8 per cent to 150,340 units from the previous session’s 1.5 million units. The value of securities slumped by 55.9 per cent to N18.7 million from N42.3 million, and the number of deals depreciated by 37.3 per cent to 32 deals from Tuesday’s 51 deals.
At the close of business, Great Nigeria Insurance (GNI) Plc was the most traded stock by value on a year-to-date basis, with 3.4 billion units valued at N8.4 billion, followed by Infrastructure Credit Guarantee (Infracredit) Plc with 2.3 billion units transacted for N6.5 billion, and CSCS Plc with 77.2 million units traded for N5.5 billion.
GNI Plc was also the most traded stock by volume on a year-to-date basis, with 3.4 billion units worth N8.4 billion, followed by Infracredit Plc with 2.3 billion units exchanged for N6.5 billion, and Resourcery Plc with 1.1 billion units sold for N415.7 million.
By Adedapo Adesanya
Foreign exchange (FX) pressure eased on the Naira on Wednesday. August 12, at the Nigerian Autonomous Foreign Exchange Market (NAFEX). Its value appreciated against the United States Dollar by 0.17 per cent or N2.31 to close at N1,360.58/$1 compared with the previous day’s N1,364.89/$1.
The Nigerian Naira also improved its value against the Pound Sterling at midweek at the official FX market by N1.62 to quote at N1,840.99, in contrast to Tuesday’s rate of N1,842.61/£1. It gained N3.49 against the Euro during the session to settle at N1,572.01/€1 versus the preceding session’s N1,575.50/€1.
However, the Naira depreciated against the greenback yesterday at the GTBank forex counter by N3 to sell for N1,370/$1 compared with the previous day’s N1,367/$1, and at the parallel market, it maintained stability at N1,395/$1.
Data from the Central Bank of Nigeria (CBN) indicated that interbank FX turnover rose sharply by 481 per cent to $168.758 million from $29.060 million due to an increase in banks’ activities as intermediaries for their customers.
The apex bank data indicated that the number of deals at the interbank FX market surged to 190 from 47 the previous day.
As for the digital currency market, benchmarked tokens were more positive in line with the US inflation report that eased nerves but failed to spark a broad crypto rally.
Headline inflation rose 0.1 per cent on the month and 3.4 per cent on the year, with the core measure that strips out food and energy up 0.2 per cent and easing to 2.5 per cent.
July inflation matched forecasts, reinforcing expectations that the Federal Reserve can wait on further rate moves and prompting modest gains in gold, equities and some digital assets.
TRON (TRX) grew by 0.7 per cent to $0.3374, Binance Coin (BNB) jumped by 0.4 per cent to $612.84, Ethereum (ETH) rose by 0.3 per cent to $1,892.73, Solana (SOL) increased by 0.3 per cent to $76.37, and Bitcoin (BTC) added 0.2 per cent to sell at $63,768.51.
On the flip side, DOGE slipped by 1.6 per cent to $0.0705, Cardano (ADA) lost 1.1 per cent to end at $0.1844, and Ripple (XRP) declined by 0.7 per cent to $1.01, while the US Dollar Tether (USDT) and the US Dollar Coin (USDC) traded flat at $1.00 apiece.
