Nigeria, The Only OPEC Member Which Missed Out on The Russia-Ukraine War Oil Windfall

In the wake of the Russia-Ukraine conflict that triggered oil windfall, petroleum exporting countries got an unanticipated opportunity to increase their revenue generation.

Oil prices rose as high as $130 per barrel, marking a significant shift from the market’s pandemic-induced turmoil. Though high oil prices posed a fresh global economic challenge, it presented a golden opportunity for some economies.

“The reality, though, is that the global crude and product system has suddenly become more complicated, less efficient and higher cost. This will be reflected in prices,” Simon Flowers, Chairman, Chief Analyst and author of The Edge, said.

For members of the Organization of Petroleum Exporting Countries (OPEC), a window opened for replenishment of what was lost to the pandemic. The organization generously increased oil output quota for its members as demand soared.

The once upon a time golden opportunity saw many members of OPEC, particularly in the MENA region, scooping billions of dollars in revenue, boosting their GDP.

Saudi Arabia led the pack with a whopping $1 billion per day revenue from oil export. The kingdom’s oil exports reached $30 billion in March, the highest in at least six years. The value of crude exports increased by 123% year on year, according to the kingdom’s statistics office.

Oman recorded a budget surplus of 784 million rials ($2 billion) in the first half of 2022, due to increase in oil output. Oman’s oil production rose to 1,037,000 barrels per day from 952,000 bpd in the same period in 2021.

Other MENA countries like Kuwait and Qatar also caught the wind of fortune. In other parts of Africa, there’s an uptick in both oil production and revenue. Angola overtook Nigeria as Africa’s largest oil producer.

While the oil windfall provided succor for OPEC members, Nigeria, Africa’s largest economy and the continent’s former largest oil producer, was left out.

“Nigeria is the only major oil exporter that hasn’t benefited from the windfall of higher global oil prices,” Dr Michael Olawale-Cole, President of Lagos Chamber of Commerce and Industry said.

The miss, which came with a brutal consequence of huge revenue loss, was masterminded by factors that the Nigerian government is still grappling with.

On Monday, the Minister of State for Petroleum Resources, Dr Timipre Sylva, decried the level of oil theft rocking the oil sector. He said Nigeria is losing 400,000 barrels per day to crude oil theft, which is capable of crashing the economy as it undermines the country’s earning capacity.

“It is a national emergency because the theft has grown wings and reached a very bad crescendo… And because of the height and orchestrated nature of the menace, Nigeria could not take the advantage of opportunities that abound in the gas production… This is because no investor would want to invest where there is incessant insecurity and vandalism of the infrastructure,” he said.

Nigeria has failed to meet up with its OPEC quota which has been increased to 1.8 million barrel per day (mbpd) due to the rise in crude oil demand globally. The country could only boast of 1.4 mbpd as of July 2022.

Besides this backdrop, Nigeria has no functioning refineries – thus, it imports refined petroleum products at the international market rate. The international market rate, which is unaffordable in Nigeria given the poverty rate in the country, has forced the government to pay billions of dollars in fuel subsidies.

In fact, the oil windfall was a curse rather than a blessing to Nigeria because it yielded budget deficits that the government has resorted to borrowing to upset. Nigeria’s oil benchmark for 2022 national budget was pegged at $62 per a barrel, which would have yielded budget surplus if not that the country is not refining its crude oil products. This means, Nigeria was losing more in revenue as soon as oil prices rose above $62.