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OPEC: Nigeria Under Pressure to Join Oil Output Cuts

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  • OPEC: Nigeria Under Pressure to Join Oil Output Cuts

Ahead of the meeting of the Organisation of Petroleum Exporting Countries today (Thursday), other members of the group have expressed their eagerness to rescind Nigeria and Libya’s exemptions from oil production cuts and have them join efforts to ward off a supply glut.

The production cuts deal, which began on January 1, 2017, indicated that OPEC countries and 10 non-OPEC producers led by Russia would cut a combined 1.8 million barrels per day in supplies to tackle oversupply and prop up prices.

It was later extended till the end of 2018.

Nigeria and Libya were exempted from the cuts as they dealt with internal unrest that had targeted their oil infrastructure.

OPEC’s main advisory board said last month that the group needed to cut oil production to avoid an oversupplied market in 2019.

Earlier in November, OPEC secretariat said in a report that the group needed to pump 1.36 million barrels per day less next year than it did in October to avoid flooding the oil market in 2019.

OPEC pumped 32.9 million bpd in October, as Saudi Arabia boosted production sharply, compared with 32.3 million bpd in January.

Delegates attending the OPEC meeting in Vienna told S&P Global Platts on Wednesday that they would be asking Nigeria and Libya to accept a production cut quota if OPEC could reach a new supply accord.

“We are hopeful that they will come around this time and understand that everyone has to cut together,” an OPEC delegate was quoted as saying, asking not to be named because of the sensitivity of the discussions.

The delegate added that both countries had made significant improvements to their production since the current deal went into force in January 2017, and it was time for them to “contribute.”

Production from Libya has surged by 520,000 bpd, or more than double, from the October 2016 baseline on which the 1.8 million bpd cuts were based, while Nigerian output has risen by 210,000 bpd, or 13 per cent, according to S&P Global Platts OPEC survey data, though both have had volatile swings.

Saudi Energy Minister Khalid al-Falih has in recent weeks travelled to Libya and Nigeria to press them on the exemptions, though no public commitments have been announced.

Falih, after meeting with Nigeria’s Minister of State for Petroleum Resources, Dr Ibe Kachikwu, in Abuja last month, said some OPEC members “were complaining” in the summer that the two countries were “overproducing” and contributing to rising OPEC production.

“We have seen a great deal of stability and consistency, both operationally and, more importantly, in terms of security and bringing the sector back to normal,” Falih said.

The Head of Libya’s National Oil Corporation, Mustafa Sanalla, has been very vocal in saying that Libya expects to maintain its exemption, as its output remains extremely prone to the political instability that has plagued the violence-wracked country since 2011.

Libya pumped 1.05 million bpd in November, according to the latest Platts OPEC survey, far below its pre-2011 capacity of 1.6 million bpd.

For Nigeria, cutting output could be tricky, as its oil production is set to climb to around 2.2 million bpd by early 2019, with the startup of the giant 200,000 bpd Egina field due in the coming weeks.

Nigerian oil production has also recovered steadily after it has slumped to around a 30-year low in mid-2016 due to attacks on its key oil infrastructure in the oil-rich Niger Delta.

But state-owned Nigerian National Petroleum Corporation recently warned that sabotage of its facilities was on the rise, and the country’s general elections in February could bring more instability.

Kachikwu, after meeting with Falih, said it was too early to talk about exemptions. But in a nod to the pressure, he said he would work closely with the six-country OPEC/non-OPEC monitoring committee chaired by Falih to ensure that Nigeria does not upset the coalition’s market balancing efforts.

“Since the last exemption, Nigerian [production] has been coming up a bit…our national oil company has been able to raise volumes up from where we were before at the time the exemptions were granted, and so we would work within those parameters and see what our responsibilities are to OPEC,” Kachikwu said.

The Chairman/Chief Executive Officer, International Energy Services Limited, Dr Diran Fawibe, told our correspondent on Wednesday that “Nigeria cannot afford to distance itself from any policy that will stabilise the global oil price.”

A petroleum expert, Mr Bala Zakka, said he would expect Nigeria to join the production cuts deal given that the country and Libya had been exempted for two years.

He said the two countries should adhere to whatever restrictions or quotas they would be given.

Is the CEO/Founder of Investors King Limited. A proven foreign exchange research analyst and a published author on Yahoo Finance, Businessinsider, Nasdaq, Entrepreneur.com, Investorplace, and many more. He has over two decades of experience in global financial markets.

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Nigeria’s Plan to Review Oil Companies’ Gas Flaring Strategies

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Nigeria is ramping up its efforts to address environmental concerns in the oil and gas sector with a comprehensive plan to review gas flaring strategies of international and indigenous oil companies.

The Minister of State for Environment, Dr. Iziaq Salako, announced this initiative during a national stakeholders engagement meeting on methane mitigation and reduction held in Abuja, Investors King reports.

Gas flaring, a common practice in the oil industry, releases methane—a potent greenhouse gas—into the atmosphere, contributing to climate change and posing health risks to communities near oil facilities.

Nigeria aims to end routine gas flaring by 2030, aligning with global climate goals and commitments.

Dr. Salako explained the importance of reducing methane emissions and highlighted the detrimental effects on public health, food security, and economic development.

He outlined practical steps being taken to tackle methane emissions, including the development of methane guidelines and the engagement of government institutions.

The ministry, through the National Oil Spill Detection and Response Agency, will conduct periodic reviews of oil companies’ plans to ensure compliance with the gas flaring deadline.

Deloitte management consultants will assist in conducting comprehensive forensic audits to scrutinize the legitimacy of forward-contracted transactions.

President Bola Tinubu’s commitment to environmental sustainability underscores the government’s dedication to addressing climate change and fulfilling its multilateral environmental agreements.

The engagement event served as a platform for stakeholders to discuss methane mitigation strategies, existing policies, and implementation challenges.

Collaboration and dialogue among diverse sectors are crucial in charting a unified course towards sustainable methane reduction in Nigeria’s oil and gas industry.

As the country navigates its environmental agenda, ensuring accountability and transparency in gas flaring practices remains paramount for achieving a greener and healthier future.

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Economy

Interest Rate Jumps to 24.75% as CBN Takes Aggressive Stance Against Inflation

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Dr. Olayemi Michael Cardoso

The Central Bank of Nigeria (CBN) has announced a significant increase in the monetary policy rate, known as the interest rate, to 24.75%.

This move disclosed by CBN Governor Olayemi Cardoso during the 294th Meeting of the Monetary Policy Committee press briefing in Abuja, represents a bold step by the apex bank to address the mounting inflationary pressures faced by the country.

With inflation soaring to 31.70% in February, the CBN aims to moderate this upward trend by tightening its monetary policy stance.

This decision follows the previous hike in the interest rate to 22.75% in February, showcasing the CBN’s commitment to combatting inflationary forces.

While the bank opted to maintain the Cash Reserve Ratio at 45%, the significant increase in the interest rate underscores the urgency of the situation and the need for decisive action.

Governor Cardoso emphasized that these measures are essential to stabilize the economy and safeguard the purchasing power of the Nigerian currency.

The 294th MPC marks the second meeting under Governor Cardoso’s leadership, indicating a proactive approach to addressing economic challenges.

The next MPC meeting is scheduled for May 20th and 21st, 2024, highlighting the ongoing commitment of the CBN to navigate Nigeria’s economic landscape amidst inflationary pressures.

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Economy

Nigeria Braces for 10th Consecutive Interest Rate Hike by Central Bank

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Central Bank of Nigeria (CBN)

As Nigeria grapples with persistently high inflation, the Central Bank of Nigeria (CBN) is gearing up to implement its tenth consecutive interest rate hike in a bid to curb the soaring prices and attract investment.

Analysts surveyed by Bloomberg are anticipating a substantial 125 basis-point increase in the key rate to 24%, marking one of the most significant adjustments in the current tightening cycle.

The decision, expected to be announced by Governor Olayemi Cardoso on Tuesday at 2 p.m. in Abuja, comes on the heels of inflation accelerating to 31.7% in February, far surpassing the central bank’s target range of 9%.

This surge has been primarily attributed to the sharp depreciation of the naira, prompting authorities to devalue the currency twice since June to narrow the gap with the unofficial market rate and encourage investor confidence.

While these measures have seen the naira strengthen in recent days and bolstered investment inflows, including a fourfold increase in overseas remittances and significant foreign investor portfolio asset purchases, there remains a palpable need for more decisive action.

Giulia Pellegrini, a senior portfolio manager at Allianz Global Investors, emphasized the necessity for the CBN to intensify its tightening efforts to regain foreign investors’ confidence in the local bond market.

While acknowledging the positive strides made by the central bank, Pellegrini stressed the importance of a more assertive approach to prevent the diversion of investor attention to other frontier markets.

As the Nigerian economy navigates through these challenging times, the impending interest rate hike signals the CBN’s determination to address inflation head-on and foster a more stable economic environment.

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