Will OPEC oil cut for Nigeria affects its 2017 budget performance?

shakirudeen taiwo

July 11, 2017 6:07 PM

If the cut decision is made, it would greatly affect the country's ability to funds implementation of its 2017 budget, which already has a deficit of N2.36 trillion ($7.7 billion).

OPEC sees rivals boosting oil output despite weak prices.

Achieving a considerable level in the implementation of Nigeria’s 2017 budget is being threatened by the proposed inclusion of Nigeria and Libya in the OPEC/Non-OPEC oil cap.

This indication was given by the chairman of the committee monitoring the compliance of OPEC and non-OPEC suppliers on output cuts and Kuwait’s oil minister, Issam Almarzooq, at the sideline of an energy conference in Istanbul, Turkey on Monday, July 10, 2017.

Almarzooqsaid Nigeria and Libya have been invited for discussion as regards the possibility of capping its oil output. This discussion is expected to be part of the agenda at the OPEC and non-OPECproducers’ meeting in St. Petersburg, Russia on July 24, 2017.

“We invited them to discuss the situation of their production. If they are able to stabilise their production at current levels, we will ask them to cap as soon as possible.

“We don’t need to wait until the November meeting to do that,” he said.

Nigeria’s Minister for Petroleum Resources, Dr Ibe Kachikwu stated that the country is not opposed to the move, while the ability of the country to fund its 2017 budget deficit of N2.36 trillion ($7.71 billion) may be a great challenge.

The mounting debts of the country have also been a subject of debate in many major economic fora in the country in recent time. Though, the country has limited or no option expect approaching these debt markets for fund.

The World Bank Group (WBG) has also raised concern about allocation of huge fund to debts servicing rather than infrastructural development by Nigeria.

According to government expenditure bill for the year, a whopping 21.6% is allocated to servicing accumulated debts by the country.

If the oil cut is extended to include Nigeria, the projected oil revenue may not be achieved and may further slow the wheel of development in the country.

More important, is the hope that infrastructure-based spending in the 2017 budget would pull the country out of recession.

shakirudeen taiwo