2023 FG Budget At Risk As OPEC Cut Output. Nigeria’s 2023 budget is in jeopardy if OPEC limits oil production to 1.38 million barrels per day.
The Federal Government’s 2023 budget is at risk as the Organization of Petroleum Exporting Countries (OPEC) and its allies have agreed to cut oil production by 1.393 million barrels per day. The cut, which will take effect from January 1, 2023, is expected to reduce Nigeria’s oil production quota by 20.7 percent. Below You Will understand More why 2023 FG Budget At Risk As OPEC Cut Output.
The 13-member oil cartel decided to change the overall crude oil production level for OPEC and non-OPEC participating countries in the Declaration of Cooperation (DoC) to 40.46 million bpd, effective 1 January 2024 through 31 December 2024, during the oil market meeting held on June 4, in Vienna.
The largest economy in Africa will have its daily production quota reduced to 1.380 million barrels under the revised production schedule decided upon in the virtual conference, which will run from January to December 2024.
Given that oil is a significant source of money for Nigeria, the reduction in the oil production quota by OPEC would constitute a restriction on its oil production and exports, which might have an impact on government revenue, budget planning, and overall economic stability.
Nigeria’s expected output quotas for August, September, October, and November were 1.826 million bpd, 1.830 million bpd, 1.826 million bpd and 1.747 million bpd respectively.
However, Nigeria’s inability to meet previous quotas has shrunk dollar proceeds from oil sales. A significant amount of the country’s crude lies stranded as buyers turn to cheaper alternatives.
Recent data from the Nigerian Upstream Petroleum Regulatory Commission (NUPRC) indicates that Nigeria’s crude oil production dropped to its lowest level in seven months, reaching 998,602 bpd in April this year.
According to a statement by OPEC, the required production level for Congo and Nigeria may be updated to equal the average production that can be achieved in 2024, as assessed by IHS, Wood Mackenzie, and Rystad Energy) specialised in oil upstream by the next ONOMM to be held by the end of 2023.
“Nigeria’s stated production plan in 2024 is 1,578,000 bpd subject to verification, and if verified then the number will be reflected as required production for 2024,” OPEC said.
The OPEC+ cut is a reminder of the vulnerability of the Nigerian economy to oil price volatility. The government needs to take steps to diversify the economy and reduce its reliance on oil. This will help to protect the economy from future shocks.
The following are some of the steps that the government can take to diversify the economy:
- Invest in agriculture and manufacturing.
- Promote tourism.
- Develop the solid minerals sector.
- Encourage foreign investment.
The government also needs to improve its governance and transparency. This will help to attract foreign investment and create a more favorable environment for businesses. 2023 FG Budget At Risk As OPEC Cut Output.
The government is urged to take urgent steps to address the challenges posed by the OPEC cut. These steps should include:
- Increasing non-oil revenue by diversifying the economy and attracting foreign investment.
- Cutting spending by reducing waste and corruption.
- Investing in infrastructure and human capital development to boost economic growth.
- Providing social safety nets to protect the most vulnerable from the impact of the OPEC cut.
The OPEC cut is a wake-up call for the Nigerian government. It is time for the government to take concrete steps to diversify the economy and reduce its dependence on oil. If the government fails to act, the Nigerian economy will face a major crisis. 2023 FG Budget At Risk As OPEC Cut Output.