Can Nigeria’s economy withstand OPEC's production cuts?

Nigeria, an oil-dependent economy, is facing significant challenges as a result of the OPEC production cuts. The decision by Oil Produce Accolub and its allies to extend the 9.7 million phase one production adjustment deal until the end of July has put pressure on Nigeria to remain compliant with OPEC's agreement. Nigeria's Minister of State Petroleum Resources, TimiPriya Silver, emphasized Nigeria's commitment to the cuts, highlighting that Nigeria's share of the OPEC cuts is 23% of total production. Bongo Adi, a senior lecturer at the Lagos Business School, provided insights into the implications of these cuts on Nigeria's economy. Adi noted that enforcing compliance with the production cuts is challenging, as seen in the past with OPEC agreements. He pointed out that Nigeria had already been impacted by the pandemic and low oil prices, leading to budget adjustments and a search for external borrowings to bridge the revenue gap. The compliance with the OPEC cuts adds further strain to Nigeria's economy, with the country under pressure to adhere to the agreement despite the challenges it poses. Adi highlighted that Nigeria is no longer a major player in influencing OPEC decisions and has become a price-taker in the market. The burden of compliance falls on ordinary citizens, who bear the brunt of the cuts through increased hardship, poverty, and job losses. The informal sector, where many rely on daily earnings, is particularly vulnerable to the economic downturn, exacerbated by the enforcement of lockdown measures. Despite attempts by the government, such as relief programs and monetary policy adjustments, the impact on the economy remains significant, with limited relief for businesses and individuals affected by the production cuts. The economic challenges faced by Nigeria underscore the complexities of balancing compliance with OPEC agreements and sustaining the country's economy amidst global oil market dynamics. As uncertainties loom over the market due to factors like Saudi Arabia's decision to end deeper cuts post-June, Nigeria must navigate through a precarious economic landscape defined by volatility and external factors beyond its control.