Economy must diversify as moves made to cap Nigerian oil production

AS GLOBAL oil prices continue to wallow around the US$45 a barrel mark, Nigeria may soon be asked to cap its output.

Bloomberg reported that Kuwait oil minister Issam Almarzooq said placing a cap on both Libyan and Nigerian output could help re-stabilise the market.

An invitation has been extended to Nigeria to join OPEC and non-OPEC producers at a meeting in Russia at the end of the month.

“We invited them to discuss the situation of their production…if they are able to stabilize their production at current levels, we will ask them to cap as soon as possible,” Mr Almarzooq reportedly told Bloomberg.

Nigeria had been exempt from current OPEC installed production cuts because its production was so low.

Last month Nigeria’s production rose 50,000 barrels, according to a Bloomberg survey.

The decision to cap Nigerian production may be a difficult one, with Nigeria relying so heavily on oil for revenue while a global effort to curb production could drive oil prices higher.

So far OPEC’s decision to cut production hasn’t paid off because both Libya and US shale output has been high.

London-based analyst Abdulsamad Al-Awadhi told Bloomberg that “OPEC needs to have better compliance, and it must respect the right of Libya and Nigeria to go back to the market. Other countries that raised output while Libya and Nigeria are out should do more and give space to these two countries to go back to the market”.

The precarious nature of oil prices and the fact Nigeria’s budget would collapse if a major shock hit the oil market showed that the government’s push to diversify the economy is a must.

Banks like Heritage Bank and Guaranty Trust Bank have been leading the way on this front, with GTB recently winning an award for best SME bank in Nigeria.

Heritage Bank, led by MD Ifie Sekibo, has recently shown its commitment to developing Nigeria’s agricultural sector, while focusing heavily on SMEs as well.

Whether Nigeria decides to cap production, the public will have to wait until July 24.