The 2019 budget is facing its first hurdle even before it is debated and passed by the national assembly following a cut in Nigeria’s oil produ
ction quota by the Organisation of Petroleum Exporting Countries (OPEC) by 3.04 percent to 1.685 million barrels per day for the first half of next
year, as part of efforts to reduce oversupply in the global crude oil market.
The production cut, which is to be implemented from 2019, has cast a shadow over the 2.3mbpd crude oil production assumption on which the 2019 budget is based. Nigeria expects 52.9 percent of its N8.83 trillion
proposed budget to be funded by oil revenues.
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OPEC and 10 non-OPEC countries agreed earlier this month to cut oil production by 1.2 million bpd effective from January for an initial period of six months to shore up what many expect to be weakening market fundamentals ahead.
Nigeria, which was exempted from the previous cuts since January 2017, was asked to join the deal during the OPEC meeting on December 7 in Vienna.
With a reference level of 1.738 million bpd, Nigeria’s oil production is to be cut by 53,000 barrels to arrive at the new quota of 1.685 million bpd, according to a breakdown of member quotas under OPEC’s supply
accord released by S&P Global Platts on Thursday.
OPEC kingpin, Saudi Arabia, has pledged to lower its crude oil output to 10.311 million bpd – a 322,000 bpd cut from its October level, the document p
repared by OPEC’s secretariat showed.
The document showed that OPEC would shoulder 812,000 bpd of those cuts, while the non-OPEC participants would cut 383,000 bpd.
Iraq, OPEC’s second highest producer, will cut 141,000 bpd to reach an output level of 4.512 million bpd and the UAE will cut 96,000 bpd to average 3.072 million bpd.
Iran, Libya and Venezuela are exempted from the cuts.
Ibe Kachikwu, Nigeria’s junior petroleum minister, said on December 7 that it was very difficult for Nigeria to reduce its crude oil production.
Kachikwu, who spoke on ‘Bloomberg Daybreak: Europe’ ahead of the OPEC meeting in Vienna, stated that there was a need for an extension of production cuts to stabilise the global oil market.
Asked if Nigeria would be able to reduce production, he said, “It is very difficult to do that but where we are now, everybody must be seen to contribute. Obviously, the smaller it is, the more amenable we are to
participate; the larger it is, the more we will struggle to participate.
“We have got exemption three times understandably. This time round, I think there is a decision that everybody should be seen to chip in.”