In 2020, following the onset of COVID-19, Nigeria saw the lowest average daily oil production in almost a decade as demand for oil decreased. Since then, it has been an upheaval task to regain stability in the oil sector as the government tries to make significant growth in production.
However, as 2023 comes to
an end, there might be some hope for the oil sector. This can be majorly
attributed to the newly
signed memorandum of understanding (MoU) between
Nigeria and Saudi Arabia. This partnership seeks to advance the mutual benefits
and interests of the two countries into the future. It also comes after Afrexim
Bank approached oil traders to fund the oil-backed loan
to NNPC LTD, the country’s oil company, as the government tries to clear
foreign exchange obligations.
Nigeria currently has the
largest oil reserves in Africa, while Saudi Arabia has the second largest in
the world. This MoU was signed by Nigeria’s minister for State Petroleum
Resources, Senator Heineken Lokpobiri, and Saudi’s Energy Minister, Prince
Abdulaziz bin Salman. It comes at a time when Nigeria is looking to greatly
improve production and technology in its energy sector.
The MoU will see Nigeria
benefit from Saudi’s advanced technological knowledge in oil exploration and
production, which should boost the country’s efficiency in energy
operations. Senator Heineken Lokpobiri
is confident that this partnership will see Nigeria increase its crude oil
production levels, improving its position in the competitive global energy
market.
Another expected major
benefit of this MoU to Nigeria is increased foreign investment in Nigeria’s oil
industry. These foreign investments could either be directly from Saudi Arabia
or from other global players whom Saudi Arabia has influenced.
As of this writing, the
country has secured about $13
billion in investment commitments for
next year. These investment commitments were pursued by Olu Verheijen, the
Special Adviser on Energy to the President, and the Nigerian Upstream Petroleum
Regulatory Commission (NUPRC) — they recently met up with representatives of
the 15 oil and gas companies that operate in Nigeria.
Some of the major companies
that have already committed to boosting their investments in Nigeria’s oil
industry include TotalEnergies, Shell, and ExxonMobil. This bid is President
Bola Tinubu's latest attempt to remedy the country’s ongoing revenue and forex
crisis and stabilize the economy.
With the country facing a
revenue crisis, the youth has
been mostly impacted. While some have tried their luck in online casino
games or on sports betting platforms, a significant numberof
youth have resorted to oil theft in the Niger Delta region for sustenance.
However, Defence Minister Bello Matawalle has sounded a warning to those
involved, stating that the military has made significant progress in making
arrests and destroying illegal panels.
Defence Minister Matawalle
also reiterates the optimism that Nigeria's oil sector will keep performing
better with high production targets for the end of the year. He expects that
the country will be producing an average of 1.9 million barrels a day by the
end of the year. Hitting this target is critical as it will ensure Nigeria’s
ability to meet the new crude oil production quota for January 2024, which is
2.2 million barrels a day.
As of the end of October
2023, the statistics from the Nigerian Upstream Petroleum Regulatory Commission
showed the country’s crude oil production was at 1.5
million barrels a day.
This oil production
trajectory needs to be maintained to fulfill President Bola Tinubu’s campaign
promise to revive the economy and expand it by at least 6% every year.
President Tinubu’s few months of leadership have been under heavy scrutiny by
Nigerians as he began by making ‘necessary sacrifices’ such as putting an end
to fuel subsidies.
Nigerians have been heavily
impacted by the subsequent rise in the cost of living after the fuel subsidies
that have been in place for nearly 50 years were scrapped under the new
administration. Even worse, the Naira has been on an all-time low recently when
it hit the 1,000 mark against the dollar in the black market.
President Tinubu’s
government cited that keeping fuel prices extremely low through subsidiaries
has forced the country into debt and cost the state billions of euros.
For the past five months,
Nigerians have had to relook at their spending habits and realign their budgets
due to the soaring costs of petrol, food, and transport. However, as the year
comes to an end, the strides made by the government in the oil sector have
revived hopes for the better days promised by the president.
The signed MoU with Saudi Arabia is a green light that the country is headed in the right direction, and possibly sooner rather than later, this economic crisis will be a thing of the past. This will be especially good news for the almost 40% of Nigerians who live below the poverty line.
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