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.”
OPEC+ Delegates Seek Steady Oil Production Levels as Committee of Ministers Meet Next Week
With the recent hike in the prices of oil at the international markets, the delegates of the Organisation of Petroleum Exporting Countries (OPEC) have canvassed for a steady oil production output.
This is coming a few days before the Joint Ministerial Monitoring Committee of the organisation would meet to deliberate on the demand and supply chain of crude oil in the global space.
The meeting of the Advisory Committee of Ministers is said to hold online as top OPEC officials continue to push for unchanged oil production levels.
Investors King reports that there has been an uncertain recovery in global demand for oil as international oil prices had climbed in the past two weeks.
It was gathered that Saudi Arabia and its partners are planning to hold a review of output levels on February 1, 2023 after agreeing significant cutbacks late last year to keep world crude markets in balance.
While awaiting clarity on the recovery in consumption in China and the impact of sanctions on Russian supply, the delegates said they expected the Ministers not it tamper with the output.
The Opec+ is embracing conservative stance even China, the biggest oil importer in the world battles devastating effects of COVID-19 pandemic.
Also, Opec+ is expecting the full impact of European Union sanctions on member-country Russia over its invasion of Ukraine.
Analysts at Eurasia Group have said, in a report, that there are possibilities of Opec+ maintaining the status quo beyond next week’s meeting.
According to the report, prices of oil have stabilised while there are significant levels of uncertainty surrounding both supply and demand.
It was gathered that feedback from the top OPEC hierarchy would go a long way in forming the decision to hold steady or not.
The Secretary-General of petroleum exporting countries, Haitham Al-Ghais has expressed hope on the global economy as the nascent rebound in China is tempered by weakness in advanced economies.
For Saudi Energy Minister, Prince Abdulaziz bin Salman, Opec+ would be proactive and preemptive to keep markets in equilibrium.
The head of commodity strategy at RBC Capital Markets LLC, Helima Croft, said there were pointers that Saudi Arabia wants to adopt the policy of preemption and keep production constraints in place until there are clear indications that there is sufficient demand for additional supply.
Analysts at Goldman Sachs Group Inc. and Energy Aspects Ltd. revealed that Opec+ will only start to reverse its supply curbs, which were formally about 2 million barrels a day, and increase production in the second half of the year.
At this period, accelerating demand would have tightened the market.
Meanwhile, the 23-nation alliance is scheduled to meet at OPEC’s Vienna headquarters in early June to review production levels for other months in the year.
Oil Gains Marginally on Possible Demand Recovery in China
Oil prices inched slightly higher on Wednesday as optimism for a demand recovery in China and expectations that major producers will maintain current output policy offset global recession worries.
Brent crude oil, against which Nigerian oil is priced, appreciated by 17 cents, or 0.2%, to $86.30 per barrel after falling by 2.3% on Tuesday. U.S. West Texas Intermediate (WTI) crude climbed 7 cents, or 0.1%, to $80.20, after a 1.8% drop on Tuesday.
“Expectations that China’s fuel demand will recover in the second half of the year are growing and are likely to support market sentiment,” said Hiroyuki Kikukawa, general manager of research at Nissan Securities.
Analysts from the Bank of America Securities said the reopening of the Chinese economy after years of tough COVID restrictions could unleash a large wave of pent-up demand over the next 18 months.
On the supply side, volumes should remain steady for the medium term as the Organization of the Petroleum Exporting Countries (OPEC) and its allies, a group known as OPEC+, is expected to keep its output policy unchanged.
An OPEC+ panel is likely to endorse the producer group’s current oil output policy when it meets next week, five OPEC+ sources said on Tuesday, as hopes for higher Chinese demand are balanced by worries over inflation and the global economy.
OPEC+ in October decided to trim output by 2 million barrels per day from November through 2023 on a weaker economic outlook.
However, gains in oil prices were capped by a bigger-than-expected build in U.S. oil inventories that was reported after the market settled on Tuesday.
U.S. crude stocks rose by about 3.4 million barrels in the week ended Jan. 20, according to market sources citing American Petroleum Institute figures. That was triple the forecast for an about 1 million build in a preliminary Reuters poll on Monday.
Nissan’s Kikukawa, however, expects the build “to be temporary as the supply disruptions from a cold snap in the United States a few weeks ago would only impact data in the next couple of weeks”.
Official data from the U.S. Energy Information Administration will be released later on Wednesday.
Kikukawa expects WTI to trade in a range between $75 and $85 a barrel in the coming weeks.
Markets are also watching out for interest rate decisions from central banks for more trading cues.
“It seems that the absence of hawkish Fed comments from the current blackout period has removed a key overhang for risk sentiments for now, providing some renewed traction back into growth,” Yeap Jun Rong, market analyst at IG, said in a note.
Investors are waiting to see if the U.S. Federal Reserve will “react to recent downside surprise in inflation and growth” when it meets next week, the analyst added.
Fuel Scarcity: IPMAN Decries 50% Reduction of Product Supply Since July 2022
The Independent Petroleum Marketers Association of Nigeria, IPMAN has faulted the oil sector’s incapability to cater for the full fuel supply order of oil marketers nationwide.
Investors King learnt that the volume of products supplied to marketers dropped by 50 percent since July, 2022 which has worsened the fuel scarcity situation.
The Deputy National President of IPMAN, Zahra Mustapha, during a Television interview stressed that there is confusion in the nation’s oil sector.
Mustapha, who said the fuel subsidy issue is complex, explained that the federal government is overwhelmed by the burden of fuel subsidy which is not sustainable.
“The fact of the matter is that we are in a very complex situation because the burden of subsidy that the government is carrying is no more sustainable and the volume that the NNPC for now, being the sole importer of the petroleum product, PMS, has been hit hard, because of that the supply that we receive as the marketers at the loading point is being reduced by over 50 per cent.
“It doesn’t seem that they (NNPC) are bringing in more, if they are, we will be getting the volume we usually get before. Since July/August last year the volume we receive now is not up to 40 or 50 percent of what we usually get. As of today, the volume we are getting is not enough,” he said.
Mustapha stated that the situation has been reported to the oil sector regulatory bodies and the oil marketers are expecting their actions.
He further lamented the high supply cost and transportation which makes them sell it at a much higher rate to the consumers.
“We are supposed to get this product at N148 but we are buying at N22o and it keeps increasing. 240 in Lagos, 235 in Warri, 240 in Port Harcourt, in Calabar it is as high as N250 per litre for marketers, and you buy and transport yourself to where your retail outlet is. We cannot buy the product between 220 to 240 naira, transport it for about N50, which is already N300, then expect the marketer to sell to the public for N200 or N190. It is not realisable.
“There are a lot of confusions in the industry, which the government must come in and address these confusions so that the common man can get the product for the approved price,” said Mustapha.
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