Economy under threat as oil price again falls below Nigeria's benchmark of $73

Minister of Petroleum Resources, Mrs. Diezani Alison-Madueke

Efforts by Nigeria and four other members of the Organisation of Petroleum Exporting Countries to see a reduction in oil production to revive falling oil prices proved abortive on Thursday as the 12-member cartel decided to maintain production quotas.

No sooner had word gone out that OPEC at the end of its meeting in Vienna decided not to cut production than oil prices slumped to a five-year low.

Both Brent and West Texas Intermediate crude prices fell heavily after the meeting with Brent dropping below $72 per barrel and WTI falling to $68 for the first time since 2010.

The Brent crude price, against which the Nigeria oil is priced, has fallen below the country’s 2014 budget benchmark of $77.5 per barrel, putting further pressure on oil revenue and threatening accretion to the
Excess Crude Account.

The ECA, where money over the benchmark oil price is saved, dropped to $2.5bn at the start of 2014, from around $11.5bn at the start of January 2013, according to the Central Bank of Nigeria. The minister of finance recently put the ECA balance at $4.11bn.

Oil prices have fallen more than $40 per barrel since June when oil peaked at $115 per barrel. The decline was triggered by several factors including fall in demand and supply glut largely driven by shale oil boom in the United States.

Venezuela, Nigeria, Iran, Iraq, and Ecuador pushed for cut in production to boost prices, but the group’s dominant members – Saudi Arabia, Qatar, Kuwait, and the UAE – were said to have argued to uphold the status quo.

OPEC, which supplies a third of the world’s crude oil, decided to maintain the production level of 30 million barrels per day, as was agreed in December 2011.

Oil accounts for up to 95 per cent of foreign earnings, but production has stagnated in the past two years as a result of oil theft and slowdown in investment.