Daily Independent Online.
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Tuesday, August 24, 2004.
It’s another oil windfall for Nigeria, others
Crude oil prices are again soaring,
presenting Nigeria and the rest oil producing and exporting countries an
opportunity to earn the needed income for development, Energy Editor, Chuks Isiwu,
reports.
When in 1990, crude oil
prices reached an unprecedented $41 per barrel, in the wake the Iraqi invasion
of Kuwait, Nigeria reaped an estimated $12 billion windfall. It was the best of
times for oil producing and exporting countries, though Nigeria’s
earnings from the windfall remain unaccounted for up till this moment, having
allegedly been pilfered by the military government of that era.
It is again another
season of unprecedented price hike and the nation is, more than was the case in
1990, reaping appreciably from a price jump that has seen crude prices reaching
for the sky.
The signals were there
right from the end of last year, as crude oil ended the year on a rather high
note. The New York futures, for instance, closed the year at $32.52 a barrel.
The average price for
the year stood at $31, the highest in two decades of crude oil futures trading.
The first week of this year itself saw prices rising farther with the New York
light crude trading at $34.60 a barrel. This was at variance with the
prediction of some industry experts that the market would be seeing a moderate
reduction in prices within the year.
Since then, the price
has not looked back, hitting new highs, as it went on a journey that saw it
landing at $48.40 at the weekend. Even, if the journey to this price level
appeared rather easy, most experts never expected that the price would be
reaching that high within the year. Having hit $48, experts now believe it was
only a matter of days before prices would touch the $50 mark.
“Demand for oil
is higher than what’s coming on the market in the short term,” Phil
Aiken, head of Australia’s biggest oil company, said in London.
“We’d feel fairly confident that oil prices will stay up, but I don’t
think they’ll stay at the current level long term. I think $50 oil could
be tested very soon”.
Nigeria and the other
oil producing and exporting countries are obviously in their best of times,
having been assured increased income above their projections for the year.
Nigeria, for instance,
projected, in its budget for this year, an income of N1.445 trillion (about
$10.2 billion) from crude oil export, based on a $23 per barrel benchmark price
for oil on the international market and an export volume of about two million barrels
per day. The meaning of this is that based on the latest price, the country is
earning over $24 on every barrel of crude sold by it on the international
market.
With the two million
barrels per day export volume, the country would therefore be earning as much
as $48 million (about N6.72
billion) extra income per day. In a month, this would mean an extra income of
$1.44 billion (N194.4 billion)
above the budget projection. If this trend continues over six months period,
this would translate to over $ 8.64 billion (N1.16 trillion) extra income while
in a year, it would amount to over $17.28 billion (N2.332 trillion).
These may be mere
calculations, but, it sure gives an insight into the Federal Government’s
revenue return given that prices had remained largely above the $32 mark for
the greater part of this year.
Finance Minister, Dr.
Ngozi Okonjo-Iweala, herself admited that earnings from crude oil sales had
been enormous, in fact, much more than projected. The minister disclosed
recently that the government earned over N234 billion as extraoil revenue in
the first six months of this year.
Even at that,
additional income must also have been coming to the country, as a result of the
current policy of the Organisation of Petroleum Exporting Countries (OPEC),
favouring the pumping of more oil into the market by its members to tame the
soaring oil prices. This means that Nigeria, as one of the OPEC members, is
producing well in excess of two million barrels per day that should assure it
added income.
“All the
member-countries are pumping all the oil that they can,” Abdullahi
Salatt, Qatar’s OPEC Governor, said in Vienna, Austria, where he was
attending a meeting of the OPEC’s board of governors. “That level
of price is not what OPEC countries really want but it is there and it is not
OPEC’s doing.” OPEC officials from Indonesia also confirmed that
the group favours overproduction to tame the market.
Given indications that
prices might remain up for sometime, the Iraqi OPEC Governor and head of State
Oil and Marketing Organisation (SOMO) Dhaia Al-Bakka, said his country’s
oil exports have remained at half of normal capacity for two weeks and would
not likely recover until violence ends in the nation’s southern part.
“The shipments
are still half normal levels and will rise only when the security situation
improves, “ he said.
Nigeria’s Federal
Government has not reacted to the latest prices and their implications for the
country’s development plan, but a Nigerian National Petroleum Corporation
(NNPC) source confirmed that Nigeria was committed to OPEC’s
determination to put down prices by pumping more crude into the market.
The source could not
say at what level Nigeria was producing but confirmed that it is in excess of
two million barrels per day.
OPEC members, who pump
two of every five barrel of crude oil worldwide, meet on September 15, this
year, to decide what next line of
action to take contain the defiant market.
Analysts believe that
despite the huge revenue now accruing to the oil exporting countries, it is in
their interest to work to put down the prices because every era of very high
crude oil prices are usually followed by an era of extremely low oil prices.
Until a solution is
found to the surging prices, oil producers and exporters would continue to
smile to the banks. For countries, which government officials understand the
dynamics of the oil market, this is the time to begin to prepare for the rainy
days.
Some countries are
already doing that. Whether Nigeria is doing so is yet to be known.
