Oil price drops below budget benchmark, as output stagnates

There are indications that Nigeria’s 2024 national budget may have come under funding threats following sustained decline in oil price amidst stagnation in crude oil output level.

Nigeria’s budget is funded from oil revenue by over 70 percent.

Price of Bonny Light, Nigeria’s premium grade, yesterday dropped to $76.54 per barrel, from over $80 per barrel average price recorded in May 2024, indicating a shortfall of 1.8 per cent, compared to the 2024 budget reference price of $77.97 per barrel.

This comes a few weeks after the report of the Nigerian Upstream Petroleum Regulatory Commission, NUPRC, had put the nation’s oil output at 1.4 million bpd, including condensate.

In its May Monthly Oil Market Report, MOMR, the Organisation of Petroleum Exporting Countries, OPEC, also put Nigeria’s oil output, excluding condensate at 1.28 million bpd, in April 2024.

Checks indicated that there were not much concerns last month over the drop in the nation’s oil output as the price of crude remained relatively high at over $80 per barrel.

It also showed that for the first time in 2024, there were increased concerns, yesterday, when the nation’s oil performed badly in terms of price and output, considering that the nation’s 2024 budget was benchmarked on $77.97 per barrel and 1.70 million bpd, including condensate.

In an interview with Vanguard, the National President, Oil and Gas Service Providers Association of Nigeria, OGSPAN, Mazi Colman Obasi, said: “Oil remains the backbone of Nigeria’s economy. Efforts should be made to produce more oil while protecting it from being stolen to ensure budget targets are met.”

However, in its latest May Monthly Oil Market Report, MOMR, obtained by Vanguard, OPEC, stated: “According to secondary sources, total OPEC-12 crude oil production averaged 26.58 mb/d in April 2024, 48 tb/d lower, m-o-m. Crude oil output increased mainly in Congo and IR Iran, while production in Nigeria, Iraq and Venezuela decreased.

“At the same time, total non-OPEC DoC crude oil production averaged 14.44 mb/d in April 2024, 198 tb/d lower, m-o-m. Crude oil output increased mainly in Bahrain, while production in Russia and Kazakhstan decreased.”

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This showed that despite the battle against pipeline vandalism, oil theft and illegal refining, Nigeria’s output which was benchmarked at 1.70 million bpd, including condensate and $77.96 per barrel in the nation’s 2024 budget, remains relatively low.

The Minister of State for Petroleum Resources (Oil), Mr. Heineken Lokpobiri, said: “The people are partly involved in getting crude oil for illegal refining. After the refining, they throw the rest into the river.

“By the law, the Federal Government owns the water and land resources. So, everyone should join hands with the government to fight this menace.

“No matter the proceeds gotten from the illegal refining, it cannot be enough for the people and communities. Those perpetrating the act should desist.”

He said: “President Bola Tinubu will continue to support all Nigerians in the diaspora, including the ljaw people because we occupy a strategic position in the country. Oil remains the backbone of our economy because it accounts for at least 90 per cent of forex.”

His media aide, Nnemaka Okafor, had said: “He anticipates that Nigeria’s oil production, including condensate, which was approximately 1.7 million barrels per day (bpd) before these developments, will soon be restored.

“Furthermore, the Ministry of Petroleum Resources is actively engaged in policy evolution aimed at maximizing the utilization of all available wells in Nigeria. This strategic approach will enable the country to ramp up production, thereby generating vital revenue to stabilize the nation’s foreign exchange reserves. The increased revenue will also empower the government to fulfill its commitments in providing essential infrastructure, as outlined in the 2024 budget.”