Nigeria’s role in OPEC, oil price stability and tasks ahead
One of the international leadership positions available for Nigeria at the time the President Muhammdu Buhari-led government took office in 2015 was the presidency of the Organisation of Petroleum Exporting Countries (OPEC), which the Minister of State for Petroleum Resources, Dr. Ibe Kachikwu, clinched on behalf of President Buhari.
Also, with the approval of President Buhari, Mohammed Sanusi Barkindo vied for the position of OPEC Secretary General and despite all the contentions and politicking, won the seat unanimously on the back of Nigeria’s solid contributions to the cartel.
Nigeria assumed these leadership positions at a very tough time. Oil prices had plummeted to below $20 per barrel and OPEC member countries were at war over who should or should not pump more barrels of crude into the market.
Daily Trust reports that Kachikwu’s first job was to bring every OPEC and later non-OPEC members together to find a common ground going forward, especially helping OPEC reclaim its credibility, and oil regain its relevance.
Many meetings in various parts of the world, including more engagement with non-OPEC members, led by Russia, resulted in the OPEC declaration on the need to cut roughly 1.8 million barrels of oil out of the over-supplied market.
Nigeria played key role in all the negotiation stages both at the leadership of sub-committees and in crafting the final agreements that the parties signed.
Speaking in an online podcast that focused on international energy relations and coordination, a key component of the Federal Government’s 7 Big Win programme, Dr. Kachikwu said most members of OPEC could now testify that Nigeria had regained its relevance in OPEC.
“But more important for us is that we succeeded in negotiating an exemption at the time when every country under OPEC was compelled to reduce volumes drastically to be able to shore up the 1.8 million barrels daily that was taken off the market. Nigeria was able to provide substantial justification for letting its production remain where it would and also continue to produce to fulfill and cover some of the gap and difficulties it faced in previous years of militancy. And subsequently we were able to renew those exemptions over two different cycles of OPEC cut exemption,” he said.
The minister said the effect of this exemption was that it helped to stabilise Nigeria’s supply and made funding for the budget available.
Continuing, he said, “We began to see our reserves, for the first time, grow dramatically from an all-time of $25bn to as high as $45bn. This is about $20bn movement in terms reserves growth.
“All these could not have been possible if we didn’t solve the Niger Delta problem and get an exemption from OPEC to continue to produce irrespective of the cost.”
Other areas of international coordination the government said it looked at are groups like the Gas Exporting Countries Forum (GECF), which Nigeria is a member. The idea is to align some of the country’s gas policies so as to bring them to international best standards and attract the needed investment into the oil sector.
One of the fallouts of this realignment is the plan by the Nigeria LNG Limited to take final investment decision (FID) on its seventh train which would increase substantially gas production move Nigeria to third largest exporter in the world.
Next on the line of international engagements and collaborations were strategic visits by Kachikwu to the headquarters of the International Oil Companies (IOCs) operating in the country to get their buy-in on a lot of the initiatives of the government such as gas expansion, crude oil production stabilisation and new funding mechanisms.
All these efforts have no doubt helped to place Nigeria on the investment table of most chief executives such that when investments are being considered, Nigeria was one of the countries.
Despite all of these, quite a bit more needs to be done in terms of international collaborations and relations. While Nigeria needs to strengthen diplomatic relations with countries whose trade relations with it is petroleum-based it must also address the trade imbalance.
For instance, Belgium imports very small volume of Nigerian crude but the country, according to the NBS Foreign Trade Statistics - Q2 2018, accounts for most of the gasoline consumed in Nigeria.
“In financial terms, this means that Belgium is gaining 20 times more foreign exchange than Nigeria. That means good business for Belgium but not for Nigeria,” said the Ambassador of Belgium to Nigeria in a media interview. and gas