ECONOMIC ANALYSIS: Nigeria Oil Output Forecasts Drop Sharply (By Akinrinde, Ibukunoluwa Jeremiah)

Email: ibukunoluwaakinrinde@gmail.com

Twitter: @IbukunoluwaIbk

Wood Mackenzie, an Energy Consultancy, has reviewed its forecast of the Nigerian crude oil output downwards from 2.1 million barrels per day (bpd) to 1.5 million bpd. This downward review was premised mainly on the investors’ uncertainty over the promised overhaul in the cash-strapped and debt-laden NNPC; aside other uncertainties like the lack of clarity over the government passing the Petroleum Industries Bill (PIB), the global oil market crash, global supply glut, etc.

The initial forecast of 2.1 million bpd was about the present production level; thus, the latter forecast implies a 29% decline in present production levels due to a possible investor fright over the lack of clarity on governments move to curb corruption and mismanagement in the NNPC after six months of Buhari’s administration. Presently, the Federal Government is owing oil marketers about N150 billion, which is partly accountable for the ongoing fuel scarcity.

All these gloomy warning signs and the present global oil price crash makes investors bearish about investing in the Nigerian oil sector. As such, the Joint Venture (JV) between the government and the International Oil Companies (IOCs) aimed at doubling oil production to about 4 million bpd portends a likelihood to fail because the NNPC has continually failed to fund its share of the JV.

Gail Anderson, lead Nigeria analyst at Wood Mackenzie, surmised, “The government is not doing a good job of signaling and this could hurt Nigeria’s oil production in the medium term even if oil prices recover.” The aftermath of these negative trends could, therefore, mean a fall in Nigeria’s oil output and consequently a fall in Nigeria’s oil revenue.

�����?_