As the global crude oil benchmark continued to trade above the $50 per barrel mark on Tuesday, economic and energy experts said the price rally would help soften the recession rocking the country and support economic recovery.
They, however, described as more important the need to ramp up the nation’s crude oil production, which has been significantly disrupted by the recent upsurge in militant attacks in the Niger Delta.
The militant attacks on oil and gas facilities pushed oil shipments to as low as 1.38 million barrels per day in August from a high of 2.1 million bpd in January.
The Minister of State for Petroleum Resources, Dr. Ibe Kachikwu, said late last month that production had risen to 1.7 million bpd.
Brent crude, against which Nigeria’s oil is measured, had jumped to a one-year high of $53.73 per barrel last week. It traded around $52 per barrel on Tuesday.
The Chief Executive Officer, Financial Derivatives Company Limited, Mr. Bismarck Rewane, in a telephone interview with our correspondent, said the rise in oil price would go a long way in getting the country out of recession, stressing the need for production to increase.
He said, “I am more optimistic now about the prospect of getting out of the recession. One, the price is good; two, the production is up; and three, the Nigerian President and the economic management team are not in denial as to the fact that we have an economic crisis. Therefore, they are unlikely to take it lightly; they will use every resource that comes their way and apply it diligently towards economic recovery and stimulus package.
“So, it is a positive news. But it is not exogenous variables like oil price that will do the trick; the game changer is the tenacity of the Nigerian leadership to stay the course. Variables within our control are the things that are going to get us of the recession.”
Rewane does not expect the oil price to reach $70 or $100, saying, “It is going to stay within the range of $50 and $55.”
“The budget benchmark for 2017 is $42 a barrel; so, at $52, we are $10 above, and $10 is about 25 per cent of $40. So, we are about 20 per cent above the budget benchmark. As long as we are investing it, then we will be on the route to recovery,” he added.
The Chairman and Chief Executive Officer, International Energy Services Limited, Dr. Diran Fawibe, said, “As a matter of fact, if ever the price is $45 and our production can reach two million or 2.2 million barrels per day, obviously, it will help us tremendously.”
According to him, two key things that the government needs to have to be able to turn the economy around are the increase in revenue generation and foreign exchange earnings, and these are anchored on the increase in crude oil production.
“Of course, if the price of oil can stay at $50 and above, it will help. But one is not too sure whether the over $50 price is sustainable given the current situation with regards to production by members of the Organisation of Petroleum Exporting Countries,” Fawibe said.