No respite for OPEC’s dwindling crude oil revenue
There is no doubt that crude oil has contributed substantially to Nigerian revenue since its discovery in 1956 and more especially, since 1970 when its price was on the upward trend.
But, the reverse has been the case since 2014 when the price started plummeting and cutting the country’s oil export revenue by half.Undoubtedly, the discovery of crude oil has contributed and assisted Nigeria’s economic prosperity and growth.
Nevertheless, the current dwindling in oil price since June 2014, after five years of oil windfall, has immensely affected the economy of major oil exporters like Nigeria, Saudi Arabia, Iraq and Libya.
In the past two years, the country has been having challenges financing its yearly budget, which has resulted to government’s plans to engage in diversification of the economy.
Already, Nigeria has suffered current account deficit of $15.5 billion (N4.5 trillion) in 2015 compared with a surplus of $1.3 billion it recorded in the previous year. It represents the highest in 27 years.
The value of Nigeria’s petroleum export revenue also declined from $77.5 billion in 2014 to $41.8 billion in 2015.On a wider note, the Organization of the Petroleum Exporting Countries (OPEC) experienced a 46 per cent decline from net oil export revenues in 2015 compared to 2014, according to the U.S. Energy Information Administration.
For 2015, OPEC received roughly $404 billion in net oil exports, down from the $753 billion earned in 2014.By the end of the year, OPEC’s net oil export revenues will total roughly $341 billion. From January to May, OPEC earned roughly $120 billion in net oil export revenues.
On a per capita basis, OPEC net oil export earnings is expected to decline by 17 per cent from 2015 to the full year 2016. The International Energy Administration (IEA) in its report that attributed the decline in OPEC’s net export earnings to lower forecast of yearly crude oil prices in 2016 compared with 2015.
“The price declines are expected to more than offset OPEC’s increased production and exports in 2016.”OPEC had lost $349 billion in revenue last year because of low oil prices, cutting revenues almost in half from the year before.
Also, the U.S. Energy Informaiton Administration (EIA) had in mid-June estimated 2015 revenues for OPEC countries at $404 billion, down by 46 per cent from the $753 billion the member countries earned in 2014.
Revenues last year fell to their lowest level in eleven years.Worse still for OPEC is the fact that revenues could fall even further this year, as low oil prices sank to new depths, particularly in the first quarter of 2016.
The EIA projects OPEC revenues this year to drop to $341 billion. The over all export which climbed by an average of 400,000 barrels per day, was largely because of production gains in Iraq and Saudi Arabia.
OPEC is expected to keep production more or less flat – in fact, output has declined in several member countries because of unexpected disruptions (Iraq, Libya, Nigeria, Venezuela). Some output could come back from those countries, but nothing major is expected.
The President, Lagos Chamber of Commerce and Industry (LCCI) Dr. Nike Akande, urged the Federal Government to fast track its efforts on the nation’s economic diversification agenda.
Akande called on the government to enthrone a new regime of business-friendly environment in the country to promote economic activities on a sustainable basis, stressing that the nation’s business environment has been experiencing some challenges, which have impacted negatively on business performance in the country.
She therefor advised the government to liberalise the downstream oil sector exploit diversified energy sources, adopt a flexible exchange rate regime and evolve a business-friendly monetary policy, urging the federal government to reform the budget process for timely passage and liaise effectively with the legislators to ensure that various pending bills are expeditiously attended to on time.