The Nigerian government has cause to cheer as the Organization for Petroleum Exporting Countries (OPEC) has agreed to retain the 1.8 million barrels per day crude oil production cap. This was disclosed in a statement by Mr. Idang Alibi, Director of Press at the Ministry of Petroleum. The cap was first granted in November 2016 as militant attacks hampered production, then extended in May. Minister of State for Petroleum Ibe Kachikwu pled for an extension because, though production had hit 1.802 million barrels per day in August, the country was yet to stabilize her oil production.
Implications of the extension
Maintaining the current crude oil production figures means the Nigerian government would be able to maximize her crude oil earnings. A drop on crude oil prices and production figures, pushed the nation’s economy into recession. The federal government had to ramp up debt issuance, and bail out state and local governments.
The Central Bank of Nigeria (CBN) would also be able to maintain its defence of the naira. The apex bank has spent billions of dollars to keep the country’s exchange rate ready. Nigeria earns a large proportion of her foreign exchange earnings from crude oil, and the drop in forex earnings, lead to a massive devaluation of the Naira, and the CBN imposing fx controls.
OPEC was created at the Baghdad conference which held between September 10-14 1960 by Iran, Iraq, Kuwait, Saudi Arabia and Venezuela. Nigeria joined the body in 1971. OPEC’s objective is to co-ordinate and unify petroleum policies among Member Countries, in order to secure fair and stable prices for petroleum producers; an efficient, economic and regular supply of petroleum to consuming nations; and a fair return on capital to those investing in the industry.