The Organisation of the Petroleum Exporting Countries is a cartel made up of Republic of Iran, Iraq, Kuwait, Saudi Arabia, Venezuela, Qatar, Indonesia, Libya, the United Arab Emirates, Algeria, Nigeria, Ecuador, Gabon and Angola.
“Nigeria’s economy is highly oil and gas dependent,” Bismarck Rewane, CEO Financial Derivatives told CNBC Africa.
Nigeria’s oil production often suffers from the unrests such as crude oil theft in the country’s main oil producing state, Delta and production dropped from 100,000 bpd to 1.89 million in November, the lowest level since May.
“Nigeria’s quota is 1.7 million barrels. Nigeria’s projection for 2014 is 2.39, that’s 2.4 million barrels a day including condensates anyway. Now if we were to enforce 1.7 million barrels a day then it means that we would have to take about two to three hundred thousand barrels off the table. In that case the revenue impact can be quite significant,” he said.
According to Rewane, this means the government will have to decide whether to stimulate the economy, stabilise the economy or actually adjust the economy.
Before this meeting, there had been some bickering between Iran, Iraq, Saudi Arabia and Kuwait which makes this a profound time to ensure balance in the oil markets.
“Now oil production, OPEC production, is thirty million barrels and it has stayed there. The question now is that because of increased production from Iran, potential increased production from Iran, we are looking at about two to three million extra barrels a day coming on. In that case the revenue impact can be quite significant,” he explained.
On the other hand, the President of Nigeria rolled out a transformation agenda to diversify the Nigerian economy and a lot of that is about how the economy is going to diversify from oil. However, Bismarck believes this will have a muted impact due to the country’s electoral system.
“Diversification is based on the assumptions that there will be structural shifts. Structural shifts mean that there’s some pain before gain,” he added.