Nigeria is living on oil has been brought into cross-examination for the umpteenth time. With a growing population of over 200million people, a struggling economy, and fall in oil price, can we still depend upon this black gold?
Nigeria first discovered oil at Oloibiri, Bayelsa in 1956 – four years before independence, and commenced production of petroleum the subsequent year. By 1960, about 847,000 tonnes of petroleum was exported. Nigeria as been a part of Organization of the Petroleum Exporting Countries (OPEC) in 1971. Notably, petroleum accounts for about 10% of Nigeria’s GDP, and 90% of total exports revenue; which begs the question, for a way long?
Experts and economists have clamored for the diversification of an economy that has been subjected to essential oil price fluctuations. In April 2020, when oil was sold at negative prices, supply crippled, and cargoes of oil were stuck on water; eyebrows were raised on how long our economy will survive on this dependency. Forex inflows diminished, because the CBN was forced to devalue the naira in line with global realities, after several months of playing hardball. To exacerbate issues, OPEC+ couldn’t agree on reducing market supply and in some weeks of recklessness, member countries created a supply glut that would bury the oil markets. except for the intervention of the US President, Donald Trump, Nigeria would are within the middle of an oil crisis, albeit the OPEC Secretary, Mohammed Barkindo, may be a Nigerian national.
During the recent oil crisis, Russia and Saudi Arabia said they might afford low oil prices. Both economies had other sources of revenue, and deep cash reserves they will use to support their economy. Which begs the question? Can Nigeria boast like these other nations?
Nairametrics had earlier questioned if agriculture can replace oil, and a breakdown of agricultural exports showed it might take tons of investments for it to get the revenues that oil currently commands.
Nigeria is faced with revenue decline, as we’ve been compelled to scale back output to stabilize the oil market. Although the country was accused (albeit true) of cheating quotas and output cuts with other countries, as OPEC and its allies decided to scale back global oil supply. The recent deal required OPEC member countries, including Nigeria to chop their output from 9.6 million bpd to about 7.7 million bpd during a bid to stabilize the oil market. Consequently, the FG adjusted the budget benchmark to about $25 per barrel.
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How efficient are the country’s refineries?
Nigeria has four major oil refineries. Namely, the Warri Refinery and Petrochemical Plant, which has the capacity to process on the brink of 125,000 barrels of crude per day. The new Port Harcourt Refinery, with a capacity to supply 150,000 barrels per day. there’s also the ‘old’ Port Harcourt Refinery, with subpar production and lastly, the Kaduna Refinery.
The Nigerian National Petroleum’s Corporation (NNPC) published audited financial statements. during a report by Bloomberg, the corporation has been censured for years for not publishing audited reports.
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In 2018, the primary three refineries reported a combined loss of N154 billion, while the Kaduna refinery recorded zero revenue.
The country still cannot refine petroleum products to provide her internal demand, which is why the approaching Dangote Refinery, expected to open within the next few years, is targeting a daily capacity of 650,000 barrels.
NNPC led by Malam Mele Kyari, the Group director , published online the 2018 audited accounts for its 20 subsidiaries and business divisions for the primary time. consistent with the statement, National Petroleum Investment Management Services (NAPIMS), is that the group’s most profitable division.
Its boring subsidiary, the Nigerian Petroleum Development Company (NPDC), reported a post-tax profit of N179 billion in 2018.
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Outlook for the short-term
Nigeria has sought to diversify the economy, however there’s still huge specialise in its main export – Oil. The pandemic has caused the oil economy will operate forever. In 2020, global oil demand contracted for the primary time since 2009 global recession. With restrictions imposed in some cities, demand won’t reach pre-pandemic levels, as global aviation still grapples with the effect of lockdown.
Although recovery improved within the last half of 2020, prices have did not reach the $50 mark. Ultimately, the outlook for the oil market will depend upon how coronavirus are often contained, because economic activity depends on the worldwide health crisis. On the availability side, Libya seems to be back within the foray, as tensions are easing within the area. Even before the pandemic, markets had been over-supplied, resulting in OPEC+ producers cutting output with competition from American oil . Signs that the oil market looks supplied through 2025 are available.
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Given the cycle of the industry and therefore the demand contraction in 2020, a rebound in 2021 is predicted . Forecasts shows that between the periods 2019 and 2025, global oil demand will grow at a mean annual rate of slightly below 1 mb/d