Despite the optimism surrounding the rise in the price of crude oil above USD50 per barrel, Nigeria is likely to miss out on reaping from this fortunate situation. The United States Energy Information Administration, EIA, projects that the country’s crude oil production growth will remain suppressed till 2017. The EIA disclosed, in a media statement on Monday, that because cash settlements are just one of the Niger Delta Avengers (NDA’s) many demands, crude oil production stoppages are likely to continue in the foreseeable future until the Nigerian government and the NDA reach a comprehensive agreement.

The sharp dip in global crude oil prices in 2014 was the catalyst for the current economic woes in the country and since then, Nigerians have been hoping for a price reversal to kick start a recovery. As a result of oil production disruptions in the Niger Delta region, the oil-rich area of Nigeria, rises in the price of oil will no longer be enough to reverse the downward trend.

Since the beginning of 2016, the NDA have carried out systematic attacks on oil and natural gas infrastructure throughout the region and some of the attacks have targeted key oil gathering and export infrastructure. “The NDA’s attacks have resulted in immediate and severe disruptions in crude oil production, Nigeria’s oil production averaged 1.9 million b/d in 2015. By May 2016, Nigerian oil production had fallen to 1.4 million b/d, nearly a 30-year low,” stated the EIA. Some repairs have been made in the absence of new attacks, restoring disrupted production and crude oil output averaged 1.6 million bpd in June. However, the EIA purport that despite this recent increase, the continued threat of militant attacks pose a risk to sustained production.

Compared to the 2.2 millon barrels per day (mbpd) targeted in the budget, the country currently produces 1.56 mbpd showing a shortfall of 0.7 mbpd. This translates to a 29.1 percent shortfall. Given the shortfall in oil production, an increase in global oil prices over $50 will only cushion the effect of the impending recession but will not be enough to change the country’s fortunes. “For the desired diversification of the nation’s economic program to be successful, “the government will still have to depend on the petroleum sector to provide the required funds needed for growth,” said Nigeria’s petroleum minister, Ibe Kachikwu.

The militancy in the Niger delta is a situation that demands a resolution sooner rather than later, if Nigeria is to be positioned to take advantage of the global oil price increases.

For more insight, please listen to the podcast below:

Elsewhere on Ventures

Triangle arrow