Nigeria’s badly hit economy may emerge out of the waters sooner than projected as global oil prices recorded some gains Friday, marking the fifth week of consecutive modest rise on the back of the OPEC+ deals.
Organization of the Petroleum Exporting Countries (OPEC) and their allies including Russia, are collectively referred to as OPEC+.
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OPEC+ managed to seal a compromise deal over its oil production policy early next year, presenting a united front of a unanimous decision after days of disagreements.
Oilprice.com reported that “as of 8:51 a.m. ET on Friday, WTI Crude was up by 1.03 percent at $46.06, and Brent Crude was nearing the $50 a barrel mark, up 1.13 percent on the day at $49.25.
“After days of debates, OPEC+ decided on Thursday that the group would add in 500,000 barrels per day (bpd) in January to its oil production quotas, which currently calls for a production cut of 7.7 million bpd. The total production cut in January will now be 7.2 million bpd. Future assigned quotas could rise or fall, and to determine those levels of oil production beyond January, OPEC+ ministers will hold additional meetings—one each month.
“Although the OPEC+ group failed to deliver the most widely expected outcome—a three-month extension of the current level of cuts, the fact that the alliance managed to exit this week’s meeting whole and with some sort of a decision reassured the market that neither the alliance nor the cartel would be breaking, at least for the next month or so.”
In the 2021 budget proposal currently before the National Assembly, President Muhammadu Buhari’s administration had embraced a lower oil price benchmark–$40 per barrel for next year, in a cautious move to forestall the impact of the vagaries in the global oil prices.
For the purpose of revenue calculations in the 2021 budget, the Nigerian government put oil production at 1.86 million b/d, including condensate output of between 300,000 b/d and 400,000 b/d, and a benchmark oil price of $40/barrel.
This compares with a 2.3 million b/d oil output target set for 2020 although output had only averaged just 1.88 million b/d in the first half of the year.
Following the crash in global oil prices earlier this year as the coronavirus pandemic rages on, the Nigerian economy officially slumped into a second recession in three years in the 3rd quarter of 2020.
However, as the oil prices continue to inch towards $50 per barrel, it offers a beacon of hope for the handlers of the Nigeria’s oil-dependent economy.
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