NIGERIA has assumed the top spot of oil exporting countries in Africa, if the recent data obtained from the federal government is anything to go by. Penultimate week, Ministry of Petroleum Resources has revealed that crude production had reached the 2m-bpd mark. That figure is up from the first eleven months of 2016, when the country averaged 1.85m bpd, according to a December report by the state-owned Nigerian National Petroleum Corporation NNPC. A combination of external factors should help Nigeria maintain elevated oil production over the short term, with the government hoping to further enhance output through a long-awaited overhaul of the sector’s regulatory framework. An exemption from OPEC’s decision to cut global production, along with a drop in incidents in the oil-producing Niger Delta, have helped sustain the increased output and allowed Nigeria to overtake Angola as Africa’s biggest producer. A key contributing factor in Nigeria’s improved performance is its exemption from OPEC’s lower production targets, which come in an effort to shore up falling oil prices. The organization agreed late last year to limit output, together with 11 other non-member countries, including Russia, Mexico, and Oman. Prices had reached a 13year low of $26.05per barrel early in 2016, averaging around $45 a barrel for the year. A number of OPEC members have curtailed their production accordingly, with Kuwait and Oman both cutting output by more than 4%. Nigeria was granted an exemption to the production cut due to the challenges it has faced maintaining output and broader economic headwinds, including its first recession in almost 30 years and a depreciating currency. Crude output had fallen from 2.1m bpd in the first three months of 2016 to 1.7mbpd by the second quarter, while GDP is estimated to have shrunk by 1.54% over the year, according to the Ministry of Budget and National Planning. Equally important in achieving higher production is a decline in militant attacks in the Niger Delta. Violent incidents from local militias, including bunkering and infrastructure sabotage, increased in early 2016. This was partly due to uneven implementation of a 2010 amnesty agreement, as well as a move by the national government to deploy the army to guard the country’s pipelines, a role that was previously allocated to militants under the amnesty. The impact of the attacks on output varied, but they slowed the country’s production noticeably, generally by between 100,000 and 300,000 bpd, although sometimes rising to as much as 500,000 bpd. Overall, these led to a revenue loss of $4.8bn last year, according to Maikanti Baru, managing director of the NNPC. However, a series of talks between militants and the government to review the amnesty agreement appears to have borne fruit, with the last major attack occurring in mid-November.
More recently, the government announced that it will meet overdue payments to former militants under a 2009 amnesty deal. The impact of the decline in violence was immediate and led to a 28% month-on-month increase in output to 1.8m bpd in November, which rose to 1.94m bpd by the close of the year. Continuing government efforts to reform the energy sector should attract additional investment and further enhance output. Last year, top executives at the NNPC were replaced and the government initiated restructuring talks that could see the company relinquish policymaking and regulatory activities, with its constituent parts regrouped. This would leave policy and regulation to the Ministry of Petroleum Resources, while giving the new oil company the ability to raise finance separately, including via capital markets, in a model similar to Brazil’s Petrobras.

READ ALSO  Japanese company to invest $90m in agriculture –NIPC