In a move that reverberates through the global oil market, the Organization of Petroleum Exporting Countries (OPEC) and its allies have agreed to slash global oil production by 1.393 million barrels per day. As a result, Nigeria, Africa’s largest economy, will experience a 20.7% reduction in its oil production quota, according to BusinessDay.
Under the newly established production schedule discussed in a virtual meeting, Nigeria’s daily oil production quota from January to December 2024 will shrink to 1.380 million barrels. Previously, Nigeria had anticipated higher output quotas for the months of August, September, October, and November, with figures ranging from 1.747 million bpd to 1.830 million bpd.
The inability of Nigeria to meet previous quotas has resulted in a decline in dollar proceeds from oil sales. With a significant amount of the country’s crude oil remaining unsold, buyers have turned to cheaper alternatives, leaving Nigeria grappling with stranded resources.
The reduction in Nigeria’s oil production quota by OPEC poses challenges for the country’s oil industry and its overall economic stability. As oil serves as a major source of income, constraints on production and exports can have far-reaching implications for government revenue and budget planning.
Recent data from the Nigerian Upstream Petroleum Regulatory Commission (NUPRC) reveals that the country’s crude oil production hit its lowest level in seven months, dropping to 998,602 bpd in April this year. Analysts attribute this decline to critical export terminal outages, exacerbating the effects of decreased production.
In comparison to February, Nigeria’s oil production witnessed a substantial decline of 23%, falling from 1.3 million bpd. On a year-on-year basis, the dip amounts to 18% from 1.21 million bpd. As a consequence, Angola has overtaken Nigeria as Africa’s largest oil producer, as Nigeria’s output decline surpasses that of its OPEC counterparts.
During the June 4, 2023 oil market meeting held in Vienna, the 13-member oil cartel, OPEC, agreed to adjust the overall level of crude oil production for participating countries. Starting from January 2024 until December 2024, the production will be set at 40.46 million bpd. Notably, the Kingdom of Saudi Arabia voluntarily cut its production by 1 million bpd starting in July, with reports suggesting the extension of additional voluntary cuts till the end of 2024.
The United Arab Emirates (UAE) also pledged to extend its voluntary cut of 144,000 bpd until December 2024 as a precautionary measure in coordination with other countries participating in the OPEC Plus agreement
