Nigeria cash strapped economy is set to receive a boost after math of the sudden rise in the price of crude oil to over $57.00 (Fifty Seven dollars) today. This represents a 5% increase from the former price of $45.00 (Forty Five Dollars) for months now.
The effect of the rise in crude oil prices was encouraged by the agreement reached among the 14 OPEC member countries in Vienna on the strategic reduction of oil production. In the meeting, agreement was reached to cut production starting with the reduction of 1.2 Million barrels from 1st January 2017. Out of this amount Saudi Arabia, OPEC top exporter will shed off over 450,000 barrels of oil from their daily output. The reduction in oil production agreed by OPEC members was however dependent on other non OPEC members also reducing their output.
Therefore on the strength of non OPEC members including Russia agreeing to a production cut up to $ 600,000 over the weekend, the market reacted positively to the price increase with the Brent crude rising above $57.00 whilst its United States counterpart the West Texas Intermediate hit $54.50.
Oil analysts are of the view that the agreement among the various oil producers spell a good omen to the crude oil market which have suffer serious slumped in prices as a result of over production and excess supply in the world oil market. This agreement if complied with religiously will bring the market to a supply balance early next year.
The rise in oil prices will also benefit Nigeria, A member of OPEC who is badly hit by low prices of oil and also low production as a result of militant activities in the oil producing areas of the country. This misfortune has forced Nigeria’s economy into recession for the third quarter of the year.
The oil price surge will rub off on Nigeria’s battered economy and give it a much needed fresh funds which she so desperately needs to balance her trade and get out of recession.
However international finance experts have a contrary view on the sustainability of the latest oil price rally. Barclay’s is viewing the price rally with suspicion believing that oil price will surely fluctuates next year between $60.00 to $51.00 between the first and the last quarter of 2017.
The global energy watch the International Energy Agency believes the increase oil price will invite increase output from United States Shale oil producers and this will have a negative effect on the oil price increase.
It is our candid opinion that Nigeria’s present government should reach an agreement with the Niger Delta militants so as to increase her oil production up to her approved quota within OPEC. This will enable her benefit from the rallying prices which may remain high at least throughout the first quarter of 2017.