Nigeria’s oil based economy may be living on borrowed time, as the global market, especially the United States (U.S.), becomes less dependent on Africa’s crude and prices face more and more volatility, The Guardian reports.
Rystad Energy, the energy data warehouse, predicts oil production in the U.S. is growing so fast that an all-time high of 10 million barrels per day could be reached before December 31. Until recently — when it was upstaged by China and India — the U.S. was a major destination for Nigeria’s crude. But ramped-up production of shale is providing an alternative.
Nigeria has been losing its market share in Europe, its biggest regional market, as exports from the U.S. grow. In December 2015, the U.S. removed the 40-year-old restrictions on its crude exports in line with the rapid growth of its oil production, which started two years earlier. President Donald Trump’s latest trade deal with China will also allow for 105 bcf/d gas production at 3 USD/MMbtu.
Reduction in Nigeria’s oil revenue as a result of production and export boosts in the U.S. will put the economy on a tight run and create distortions in budget implementation and monetary policy controls. Crude oil price volatility still also persists in the global market.
In the 2017 budget, the senate pushed the benchmark to $44.5 a barrel with hopes that the black gold would remain at its January rate, which was above $50. Current realities, however, show that oil prices may fall below the current price as the OPEC deal loses steam to shale producers.