Recent reports that Nigeria will earn less from the 2016 boom in oil price which went up by more than one percent last week, nearing $50 a barrel, due to the countries lower production, is worrisome and requires urgent remedy.
According to Reuters, the price of Brent crude was up 76 cents, or 1.6 percent, at $49.39 a barrel in late afternoon trading on expectations the US government will report a large crude stockpiles drawdown for last week.
The attack on crude oil pipelines by the new militants group called Niger Delta Avengers led to Nigeria’s crude oil production decline to 1.4 million barrels from an average of 2.2 million barrels per day last year.
The Minister of State for Petroleum Resources, Ibe Kachikwu, said last week, while appearing before a special session of the House of Representatives convened over the recent hike in petrol price, said that the decline translated to a loss of about 800,000 barrels of crude oil daily.
On Tuesday, Eni, parent company of Nigerian Agip Oil Company (NAOC), declared force majeure on oil exports from the Brass Oil Export Terminal off Bayelsa shoreline due to the attack on its pipeline at the weekend.
Eni also said the oil firm’s production was cut by 4,200 barrels per day, following Sunday’s attack on its pipeline in Bayelsa. An earlier attack in the area on May 18 had resulted in a shutdown of some 1,000 barrels bringing a cumulative production loss to 5,200 barrels of the oil firm’s share of oil output. The rise in crude oil price was associated with the decline in the productions in Nigeria and Libya, economic meltdown in Venezuela and the recent wildfires that affected the oil production sites in Canada.
The shortfall has accelerated the recovery in oil prices, which are up nearly 90 per cent from winter lows of around $27 for Brent crude and about $26 for the U.S. West Texas Intermediate (WTI), according to Reuters.
Blueprint observes that this is coming at the heels of President Muhammadu Buhari’s disclosure that Nigeria’s economy is currently in a volatile situation due to the crash in oil prices. Buhari spoke at the Aso Rock Villa in Abuja at a farewell audience with Iranian Ambassador to Nigeria, Mr. Saeed Koozechi.
Also, the National Bureau of Statistics (NBS) in its report released last week said the economy had plunged into recession with a decline of 0.36 per cent. It said the current economic situation in the country coupled with lack of required foreign exchange to boost imports of raw materials for domestic industries would worsen the unemployment and poverty situation in the country.
“Considering the decline in oil production in the Niger Delta by 800,000 barrel daily viz-a-vis the benchmark production for 2016 budget of 2.2 million, owing to the vandalisation of oil pipelines, in addition to the inability of non- oil revenue collecting agencies to meet our revenue targets owing to the economic crunch”, he said.
Not only does the Federal Government lose billions of naira to pipeline vandals yearly, some oil companies have been forced to shut down their operations when they could no longer bear the losses owing to the vandalisation of their pipelines.
However, it is not only the government and the oil companies that lose. The pipeline vandals are also a danger to themselves and the citizens near their areas of operation as many of them have lost their lives to the explosions in the course of stealing oil from the pipes.
It is on the backdrop of the debilitating effects of the militants’ violent activities on
oil production, the mainstay of the nation’s economy, that we commend the federal government’s peace initiative. By constituting a committee to dialogue with the Niger Delta militants, the Buhari administration has demonstrated great respect for the rule of engagement. This bold initiative by the federal government is even more laudable considering the all-inclusiveness of the committee which comprises the National Security Adviser, Babagana Monguno;
Kachikwu, the Minister of Niger Delta Affairs, Usani Uguru and select leaders of thought, kings and influential individuals from the Niger Delta. The dialogue option is also coming on the heels of the flag-off of the Ogoniland clean-up.
It now behoves the Niger Delta militants to embrace the olive branch offered by government for an intensive dialogue that will restore peace to the beleaguered region by laying down their arms.
Dialogue has proven to be the best dispute resolution mechanism the world over. Recourse to violence can only aggravate the problem rather than redress it. It is in the overall interest of the region that the militants should toe the path of peace which is a sine qua non for socio-economic development. The region has suffered enough degradation. However, the bottom line to the Nigeria’s economic quagmire is the inevitability of diversifying the economy from mono-economy dependence on oil.
