The OPEC challenge                 

Angola rattled the unity the Organisation of Petroleum Exporting Countries (OPEC) 16 years after the country’s membership of the group when it recently withdrew its membership in protest about cut in its oil output quota for 2024. 

Its departure shrunk the group’s membership from 13 to 12 nations and spurring doubts over its future cohesion. It was a blow to the Saudi-led oil producer group that had sought in recent months to rally support for further output cuts to prop up oil prices. Angola happens to be the second largest oil producer in Africa.          

OPEC was formed in Baghdad in 1960 by Iraq, Iran, Kuwait, Saudi Arabia, and Venezuela with the goal to ‘’coordinate and unify petroleum policies among member countries, in order to secure fair and stable prices for petroleum producers; an efficient, economic and regular supply of petroleum to consuming nations; and a fair return on capital to those investing in the industry.’’         

 In 2021, OPEC estimated that its member countries accounted for more than 80% of the world’s proven oil reserves. The organisation in 2016 formed an alliance with other oil-producing nations to create OPEC+ in response to falling oil prices, partly caused by a huge increase in US shale oil production since 2011.             

Nigeria on July 12, 1971 became the 11th member of the organisation, and over the years became renowned as a consensus builder and deal maker, in the face of various market cycles being negotiated and unexpected events, such as macroeconomic uncertainty, geopolitics, and technological innovations threatening to throw OPEC off course. 

The country show-cased that reputation when the Minister of State for petroleum, Heineken Lokpobiri, reaffirmed Nigeria’s commitment to remaining a part of OPEC amid Angola’s exit. ‘’Our collaboration within the organisation remains pivotal in fostering stability and sustainability in the oil market,’’ Lokpobiri said. 

‘’We are resolute in our dedication to OPEC’s objectives while actively engaging with the organisation to address concerns that resonate not only within our nation’s borders but across the entire continent. 

“Nigeria stands ready to contribute constructively to the on-going dialogue, ensuring that the unique challenge and opportunities of our region are duly recognised and addressed.’’  

Nigeria’s 2024 oil production target was set by OPEC at 1.5 million barrels per day (bpd), but the country has expressed its intent to exceed this by aiming for at least 1.8 million bpd. Analysts, however, affirm the importance of Nigeria supporting the course of the leading OPEC+ member countries not to increase oil production quotas in order to prevent a drop in oil prices.  

Observers warn of the economic and political consequences for Nigeria in case of non-compliance with quotas in view of its current economic problems. Against the backdrop of Angola’s withdrawal from OPEC and the weakening of the unity of OPEC+, there are fears that it could lead to an imbalance in the oil market and significant financial losses for the cartel members.             

There is a growing consensus that the measures being taken by the Saudis and Russians to maintain oil prices would enable Nigeria and other oil-producing countries to earn much-needed additional revenue. Nigeria needs that revenue now to fund its budget amid rising inflation and rising tensions caused by insecurity and growing hunger that are increasingly pushing the country to the brink of destabilisation and social unrest. 

While OPEC is trying to achieve the highest rates of balance between supply and demand to achieve stability in the global oil market, the high inflation caused by energy prices is reportedly creating problems for the Joe Biden administration on the eve of the US presidential elections. 

This is why, according to analysts, Washington is trying to create a rift between OPEC+ members on the eve of its meeting scheduled for the end of the first quarter of 2024 in order to increase oil supply in the market and present it to American voters as one of the achievements of his administration.           

Despite Angola’s exit from OPEC in the cloud of the interplay of geopolitical influences on the demand and supply dynamics of the oil market, investors say it is in the interest of Nigeria and other African oil-producing countries to avoid disagreements and maintain discipline in OPEC+ as this will effectively regulate the market and guarantee fair energy prices for all in the future.

Modibbo Idris,

Sokoto, Sokoto state