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Worry as OPEC Cuts Nigeria’s Crude Oil Output Below 2024 Budget Benchmark

By Adedapo Adesanya

The Organisation of the Petroleum Exporting Countries and its allies (OPEC+) on Thursday asked Nigeria to produce about 1.5 million barrels of crude oil per day in 2024, lower than the 1.78 million barrels per day benchmark it proposed in the 2024 Appropriation Bill presented to the National Assembly on Wednesday for passage.

The output ceiling was around 1.8 million barrels per day before it was cut down to 1.5 million barrels yesterday at the group’s virtual meeting, a huge blow to Nigeria’s revenue target for the fiscal year.

OPEC had tasked three consultancies – IHS, Rystad Energy, and Wood Mackenzie – with verifying production figures for Nigeria, Angola, and Congo, and based on their recommendation, Nigeria has to produce at the new level.

Nigerian output has been in decline for years but has picked up in recent months, helped by more production offshore, which is less prone to security problems. According to the latest GDP data, Nigeria averaged 1.45 million barrels per day in the third quarter of the year.

The country has unsuccessfully planned on boosting its output to 1.8 million barrels, which in addition to condensate (excluded from the OPEC numbers) will total 2 million barrels per day.

However, since the country has not been able to attain its target due to security challenges like oil theft and pipeline vandalism as well as underinvestment, indications point that if the country sees no further disruptions, it should be able to meet up the 1.5 million barrels per day benchmark.

Oil, while contributing around 5 per cent to Nigeria’s gross domestic product, accounts for around 80 per cent of its foreign earnings.

During his presentation of the 2024 Budget tagged Budget of Renewed Hope on Wednesday, President Tinubu said the country was targeting 1.78 barrels per day and pegged oil price at $77.96 and the Naira exchange rate at N750/$1.

The President presented the 2024 budget proposal of N27.5trn before a joint session of the National Assembly in Abuja on Wednesday.

“Distinguished members of the National Assembly, the revised 2024-2026 Medium Term Expenditure Framework (MTEF) and Fiscal Strategy Paper (FSP) set out the parameters for the 2024 Budget.

“After a careful review of developments in the world oil market and domestic conditions, we have adopted a conservative oil price benchmark of $77.96 per barrel and a daily oil production estimate of 1.78 million barrels per day. We have also adopted a Naira to US Dollar exchange rate of N750 per US Dollar for 2024.

“Accordingly, an aggregate expenditure of N27.5 trillion is proposed for the Federal Government in 2024, of which the non-debt recurrent expenditure is N9.92 trillion while debt service is projected to be N8.25 trillion and capital expenditure is N8.7 trillion,” he said.

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