The global drop in the price of crude has battered Nigeria’s economy, slowing economic growth and cutting into government revenue. During his recent visit to the Middle East, President Muhammadu Buhari called for action to stabilize prices. But analysts say there’s little Nigeria can do to influence countries like Saudi Arabia to cut production.
Oil was on Buhari’s mind as he visited the Middle East in recent days.
In a meeting with the ruler of Qatar Saturday, he called the low price of crude “totally unacceptable.” He said fellow members of the OPEC cartel need to work together to stabilize the price.
Global oil prices have collapsed since 2014. The price of a barrel is hovering around $35, compared to more than $100 just two years ago. One way to raise the price of oil would be to decrease production, but top oil producers have been unwilling to do that.
Saudi Arabia’s leading role
An analyst with London-based Energy Aspects, Rhidoy Rashid, said Saudi Arabia would have to take the lead on any cut in OPEC production.
“Saudi Arabia is unwilling to cut output unilaterally to support the market and is extremely skeptical of other countries, including Nigeria, that they’d ever deliver on promises to reduce production,” said Rashid.
Saudi Arabia was also on Buhari’s itinerary. While there, Buhari said Nigeria is “paying the price” for failing to diversify from oil revenue and called for developing the country’s agriculture and mining sectors.
In a statement, Buhari’s office said he and the Saudi leader had committed to “doing all that is possible” to “rebound oil prices.”
Nigeria reluctant to cut production
But analyst Hannes Loacker of Vienna-based Raiffeisen Bank International said Nigeria isn’t interested in cutting its own production because of threats from militants and oil thieves.
“I don’t think that they really will do this. They have plenty of problems with pipeline attacks in their country,” said Loacker.
OPEC members are scheduled to meet later this month, where they are expected to mull a cap on production. But Loacker only said that will only be effective if all countries abide by it, and Iran has given indications that it will not.
If the oil price is to rise, Loacker said it will likely be buoyed by stronger economic growth in emerging markets such as China, which has recently faced slow growth rates and tumult in its stock exchanges.
…
