THE Organisation of the Petroleum Exporting Countries (OPEC) and its allies, known as OPEC+, plan to raise crude oil production by 547,000 barrels per day (bpd) in September could further strain Nigeria’s oil revenue target for the year.
Opec+ members’ decision to increase their crude oil out by the coming month was in response to improved global economic growth and oil market fundamentals.
The decision followed a virtual meeting on Sunday, August 3, where Saudi Arabia, Russia, Iraq, the UAE, Kuwait, Kazakhstan, Algeria, and Oman reaffirmed their commitment to ensuring market stability.
The move marks the fourth monthly increment in a phased rollback of 2.2 million bpd in voluntary production cuts, which were introduced in April and November 2023 to support prices during market uncertainties.
“By the decision agreed upon on 5 December 2024 to start a gradual and flexible return of the 2.2 million barrels per day voluntary adjustments starting from 1 April 2025, the eight participating countries will implement a production adjustment of 547 thousand barrels per day in September 2025 from the August 2025 required production level,” OPEC stated.
However, market watchers are already worried that the decision is going to pressure oil prices, which will negatively impact Nigeria’s oil revenue.
On Monday, crude oil prices fell to their lowest in a week as the OPEC+ agreement set for another large output increase in September.
Brent crude futures fell $1.17 to $68.50 a barrel by 11:27 GMT, while the United States West Texas Intermediate crude declined $1.26 to $66.07.
This raises worries as Nigeria has not been meeting its OPEC crude oil production quota of 1.5 million bpd, and has been far from meeting its budgetary benchmark target of 2.06 million bpd, causing a strain on its crude oil revenue, which makes up a significant portion of the 2025 budget.
Nigeria relies hugely on the proceeds from oil to fund a large chunk of its yearly budget, The ICIR had earlier reported, and a drop below the benchmark rate and output poses an implementation challenge.
In its N54.99 trillion appropriation, the federal government set a crude oil budgetary benchmark price of $75 per barrel and a 2.06 million bpd production target.
It further set a N34.8 trillion revenue target to fund the budget, of which N19.6 trillion will come from oil proceeds and N15.22 trillion from non-oil sources.
Analysts believe that a dropping crude oil price below the $75 per barrel benchmark and an unmet production benchmark target amid the OPEC+ out increase, which will further cause oil prices to steep, however, portends a possible setback for the country while increasing the chances for increasing borrowing by the government.
With a total public debt that has surged to N144.67 trillion as of December 31, 2024, according to the Debt Management Office (DMO), and recent loan approval of $21 billion loans with $347 million hanging in the balance, Nigeria’s debt is expected to widen.
Given its huge implications for the country’s fiscal stability, a former Vice President, Atiku Abubakar, feared that the government could be mortgaging the country’s future with its borrowing spree.
This is even as the Nigerian Economic Summit Group (NESG) has repeatedly expressed that continued underperformance in the oil sector could seriously threaten the federal government’s ability to meet its planned budgetary commitments and sustain key national projects.