The shortfall in the daily crude oil production allocation by the Organisation of Petroleum Exporting Countries (OPEC) to Nigeria is making the country to lose a whooping sum of $2.5bn monthly, the Nigeria Employers’ Consultative Association (NECA) has said.
Recall that Nigeria’s crude oil production increased by 4.2 per cent to 1.23 million barrels per day in December 2022, but NECA maintained that the production is still short.
Hence, the country has been losing about $2.5bn monthly for failing to meet the 1.8m barrel per day crude oil production allocation by OPEC.
The Director-General of NECA, Adewale-Smatt Oyerinde, in a statement noted that a 0.57 million barrel per day shortfall has been translating to about $2.5bn monthly loss for Nigeria.
Oyerinde revealed that oil theft appeared to worsen and the unsustainable subsidy on petroleum products had joined to reduce the government’s revenue, leading to absurd debt accumulation.
He said that misalignment between the fiscal and monetary policies, which were dwindling investors’ confidence, has made the country unattractive for Foreign Direct Investments.
While expressing the need for the government, especially the incoming one to show the political will to implement policies that will drive the economy back on a growth trajectory, Oyerinde said, “Crude oil production grew in the month of December 2022 by 4.2 per cent month-on-month to 1.23m barrel per day, but remained significantly short of the 1.8m barrel per day allocated by OPEC to the nation, amounting to about $2.5bn loss monthly at an average of $100pb.
“Deliberate efforts must be made to reverse some of the current policies and implement new ones. All leakages associated with government revenue must be blocked (oil theft, skewed concessions, fuel subsidy, etc.). A wholesome review of the tax administration to make it more equitable and investor-friendly should be initiated,” he further submitted.
The NECA boss, however, lamented that while governments in other climes were reducing tax rates in order to enhance economic activities, promote sustainable consumption and attract investors, Nigeria cannot continue to over-tax its businesses and citizens.
According to him, there is a misplacement of priority by the present administration which caused the underdevelopment and deterioration of critical sectors such as education, health and infrastructure in the country.
He said, “With over 50 different taxes, levies and fees and Company Income Tax hovering around 35 per cent, raising taxes in order to increase revenue will be counterproductive. As the nation nears the mark of N77trn in debt with negligible impact on infrastructural development, the incoming government must develop strategies to diversify the revenue base through the revival of the country’s lagging non-oil sectors.
“While there have been projections for a global recession in 2023, the time for a major paradigm shift in our economic philosophy is now. Over the last decade, the country has spent over N10tn on fuel subsidy, about N15.5tn on Capital Expenditure, N2.5tn on Health and about N3.9tn on Education. This is a misplacement of priority and shows that critical developmental items such as education, health and infrastructure have suffered due to crass misplacement of our economic priorities.”
Oil Prices Slide as U.S. Crude Stockpiles Surge, Heightening Demand Concerns
Oil prices declined on Thursday as concerns over demand intensified due to a larger-than-anticipated build in U.S. crude stockpiles.
Brent crude oil, against which Nigerian oil is priced, dropped by 0.5% to $83.25 a barrel while U.S. West Texas Intermediate crude oil fell by 0.3% to $78.28 a barrel.
The Energy Information Administration’s report revealed a substantial increase in U.S. crude oil stockpiles by 4.2 million barrels to 447.2 million barrels for the week ending February 23rd.
This surge surpassed analysts’ expectations and marked the fifth consecutive week of rising inventories.
While gasoline and distillate inventories witnessed a decline, concerns regarding a sluggish economy and reduced oil demand in the U.S. were amplified.
Satoru Yoshida, a commodity analyst with Rakuten Securities, highlighted that the significant stockpiles have heightened investor worries.
Moreover, the anticipation of delayed U.S. interest rate cuts further weighed on market sentiment, potentially undermining oil demand.
Traders have adjusted their expectations for rate cuts, with an easing cycle predicted to commence in June rather than March as previously anticipated.
Market participants await the U.S. personal consumption expenditures price index for insights into inflation trends, while the possibility of an extension of voluntary oil output cuts from OPEC+ looms over price dynamics, amid lingering uncertainty in the demand outlook and geopolitical tensions in the Middle East.
Crude Oil Shortage Threatens Dangote, Government Refineries, Minister Raises Alarm
The Minister of State for Petroleum Resources (Oil), Heineken Lokpobiri, has sounded a clarion call over a looming crude oil shortage that threatens the operations of the newly inaugurated Dangote Petrochemical Refinery and government-owned refineries in Nigeria.
Addressing stakeholders at the seventh edition of the Nigeria International Energy Summit in Abuja, Minister Lokpobiri expressed concerns that unless deliberate efforts are made to increase investments and crude oil production, these refineries may struggle to obtain enough feedstock for petroleum product manufacturing.
The Dangote refinery, a colossal project spearheaded by Dangote Industries Limited, has a daily requirement of up to 650,000 barrels of crude oil, while government-owned refineries could need approximately 400,000 barrels.
However, the current pace of crude oil production and investment in Nigeria falls short of meeting these demands.
Minister Lokpobiri highlighted the need to ramp up production and attract investments in the upstream sector to ensure adequate feedstock supply for the refineries.
He emphasized the importance of efficiently utilizing Nigeria’s abundant oil and gas reserves to enhance domestic energy security and economic prosperity.
Furthermore, the minister underscored the significance of investing in energy infrastructure and transitioning towards more environmentally friendly practices to address Nigeria’s energy needs effectively.
The alarm raised by Minister Lokpobiri underscores the urgency for strategic interventions and collaborative efforts to mitigate the impending crude oil shortage and secure the future of Nigeria’s refining industry amidst evolving global energy dynamics.
Oil Prices Surge as Brent Approaches $83, WTI Nears $78 Amidst Refinery Buying Activity
Oil prices surged as Brent crude oil approached the $83 price level while West Texas Intermediate (WTI) neared $78 as refineries in the United States and China increased purchases.
Brent crude oil, against which Nigerian oil is priced, gained 1.1% on Monday, signaling a bullish trend in the oil market.
The recent uptick in oil prices comes amidst signs of heightened demand from refineries, particularly in key markets like the US and China.
This surge in demand has contributed to the strengthening of timespreads, indicating tighter conditions in the near term.
Market observers are closely monitoring the International Energy Week in London, where industry leaders are convening to discuss the outlook for the global energy market.
Scheduled speakers include Russell Hardy, the CEO of Vitol Group, a major player in the energy sector.
While tensions in the Middle East and production cuts by the OPEC+ alliance have supported crude prices, increased production from non-OPEC+ countries, notably the US, has capped potential gains.
Analysts predict that oil prices may continue to trade within a range, with Brent crude expected to hover around $83, while WTI remains near the $78 mark, barring significant shifts in market dynamics.
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