NIGERIA: THE CRUDE OIL ECONOMY
Working on the assumption that the Minister of Labour and Employment, Senator Chris Ngige has not been misquoted it is difficult to understand his recent pronouncement and what now seems like an entirely incoherent message. At a recent workshop in Abuja, He raised the alarm that the country’s unemployment rate would reach 33.5 per cent by 2020 (next year). He said that the increase in the rate of unemployment in the country was alarming. According to him, the high unemployment rate of 23.1 per cent, and underemployment of 16.6 per cent was worrisome. Accepting the figures he quoted are correct, and despite the best efforts of the Nigerian Bureau of Statistics there are firm grounds to reject them, it is more than worrisome. His figures predict an increase in unemployment of over 10% year on year. In effect according to him is3 out of every10 Nigerians of working age would be unemployed and of the 6 out of 10 that will be employed almost 2 of them will be underemployed. It is unclear as to what criteria he used to define the job market. What is most disturbing is that he raises this alarm as if he, the Minister with direct responsibility for Labour and Employment was bereft of any culpability for the current calamitous state of affairs and was infact an innocent albeit concerned bystander
There can be no real dissent that the real special relationship is the one that exists between the US and Saudi Arabia and it is the one that poses an existential threat to OPEC. I am inclined to agree with Iran’s oil minister Bijan Namdar Zanganeh as he warns that OPEC is on the verge of collapse because some members are targeting their fellow producers. His remarks came after the Trump administration tightened sanctions on Iran’s oil exports on Thursday. The White House says Saudi Arabia and the UAE have agreed to offset the drop in supplies, even though OPEC has agreed to cap output through June. Saudi Arabia are yet to formally confirm this agreement stating only their ongoing obligation to ensure that the market is adequately supplied with crude and prices remain stable. Iran told the OPEC on Sunday that no member country should be allowed to take over another member's share of oil exports, this in direct response to Saudi Arabia's apparent offer to pump more oil thus increasing the efficiency of US sanctions on Iranian oil. Lest we forget despite OPEC’s nature being that of a cartel, its members are competitors for market share and in the case of Saudi Arabia and Iran pretty much everything else.
That regional rivals Saudi Arabia and Iranian have been able to co-exist within OPEC during recent years of political tension and turbulence within the Middle East has always been a tenuous proposition . Despite effectively facing off in proxy wars in Syria, Yemen and Iraq, OPEC has provided a refuge where their shared goal of obtaining the best price for their crude oil production has created an environment of collaboration albeit as a ‘marriage of convenience ’which up until recently has outweighed the political, religious and historical antipathy they share for each other.
Nigerian state oil company NNPC has announced that 132 companies have participated in the bid for the highly sort after and much prized right to crude oil for product swap tender. NNPC issued the tender for the contract in March after extending the previous contract to June 2019. The Direct Sales Direct Purchase contract
evolved from the various different original offshore processing agreements. These agreements were bought in after the import subsidy scandal which saw numerous
companies implicated in fraudalent practices such as round tripping and outright false declarations of cargoes. Because the Government regulate petrol prices at a
cap below the landing cost, importers were required to reconcile the difference between their actual cost of importing and the regulated price in accordance with
an approved template.
The subsidy scandal cost Nigeria an estimated $6.8bn which is far in excess of any amount needed to repair the nations run down and dilapidated Refineries. But the
real scandal must be that
Nigeria has announced ambitious plans to double its oil production by 2025, targetting 4 million bpd in six years’ . Maikanti Baru, Group Managing Director at the
Nigerian National Petroleum Corporation (NNPC), admits that the target is aggressive but appeared certain when he said last week that Nigeria is committed to
meeting it. The GMD has a penchant for making overly optimistic if not widly unreasonable predictions which only serve to undermine confidence in the National oil company.
Nigeria has announced ambitious plans to double its oil production by 2025, targetting 4 million bpd in six years’ . Maikanti Baru, Group Managing Director at the Nigerian National Petroleum Corporation (NNPC), admits that the target is aggressive but appeared certain when he said last week that Nigeria is committed to meeting it. The GMD has a penchant for making overly optimistic if not widly unreasonable predictions which only serve to undermine confidence in the National oil company.
Nigeria currently pumps around 2.2 million bpd in both crude oil and condensate. In March Nigeria’s crude oil production stood at 1.733 million bpd, up by 11,000 bpd
on the previous month. Over 10 years ago Nigeria commited to increase oil reserves to 40 billion barrels, that commitment never really looked plausible and has been kicked down the road until 2025 too. Nigeria has not had a bid round for over 10 years during which the passage of the Petroleum Industry Bill, the legislation created to provide certainty to investors has not been passed. It is hard to see how any investment can be made when the legislation that is meant to provide the fiscal and regulatory regime has not be passed.
The gasoline prices are coming down. I called up OPEC. I said, ’You’ve got to bring them down. You’ve got to bring them down’, and gasoline’s coming down,” US President Donald Trump's call to OPEC has created much debate. It is now clear that no such call took place. We no longer need to attempt to divine the actions of a President that full in the knowledge that his mis-speak would be exposed, he seems powerless to overcome his impulsive behavior.
The significance is however not that no such call was made, but that Trump has created the narrative that OPEC are the villans, the cause of high gasoline prices and restricting OPEC is the solution to reducung high gasoline prices. Such a narrative effectively exempts US foreign policy from any culpability in the increase in gasoline pricing. Trump asserted erroneously that as a consequence of his call to OPEC, gasoline prices had began to fall. The simple fact is that schitozphrenic US foreign policy is the definitive reason for increase in global oil prices