Nigeria’s earnings drop as OPEC sees revenues down to $323 billion

By Femi Adekoya
Compared to $595 billion in 2019, crude oil export revenues of members of the Organisation of the

Petroleum Exporting Countries (OPEC) for 2020 could decline to $323 billion, the U.S. Energy Information Administration (EIA), said in a new report, noting that this would be the lowest revenue level in 18 years.

Already, many oil producers have announced a decline in oil receipts, with Nigeria looking to the Bretton Woods institutions for loans as a buffer.
Using each country’s oil production and consumption estimates from the October 2020 Short-Term Energy Outlook (STEO), the EIA reported Nigeria’s net oil export estimated earnings between January to September 2020 at $16 billion, down from $37 billion recorded in 2019.

Although the oil sector represents less than 10 per cent of Nigeria’s gross domestic product (GDP), it accounts for half of government revenues and over 90 percent of its foreign exchange.

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In May, the government predicted that 2020 oil revenues could be as much as 80 percent lower than planned. In July, the Minister for Finance, Budget and National Planning, Zainab Ahmed, said Nigeria experienced a 65 percent decline in projected net revenues from the oil and gas sector in the first half (H1) of the year, due to the price drop and OPEC production cuts.

In November, according to The Nigerian National Petroleum Corporation (NNPC’s) document presented to the Federation Account Allocation Committee (FAAC) meeting for December 2020, revenue received from crude oil export in November amounted to $73.27 million (N27.78 billion), representing a 500% increase compared with the revenue recorded in October 2020.

Unsurprisingly, the biggest chunk of OPEC’s collective oil revenues for 2020 will be for Saudi Arabia as the biggest exporter in the cartel. For 2019, Saudi Arabia’s oil revenues totalled $202 billion—more than a third of the total—but last year’s revenues will be hit by the pandemic like those of its fellow OPEC exporters.

Like other forecasters, the EIA warned that lower oil revenues will have a strong negative impact on OPEC economies.

“The decrease in revenues could be detrimental to member countries’ fiscal budgets, which rely heavily on oil sales to import goods, fund social programmes, and support public services,” the agency said.

OPEC itself is guardedly optimistic about the immediate future, however. Despite substantial deficits and a surge in loans to prop up budgets, the cartel expects oil demand to begin recovering this year.

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In its latest Monthly Oil Market Report, the cartel forecast 2021 oil demand to rise by 5.9 million bpd, to reach 25.9 million bpd. The biggest drivers, again, would be Asian economies, where demand is seen jumping by 3.3 million bpd from 2020 when OPEC estimated it had fallen by as much as 9.8 million bpd.

In total, world oil demand is expected to average 95.9 million bpd in 2021—still nearly five million bpd below the pre-crisis levels from 2019.
“Oil demand is not projected to fully recover from the 2020 slump,” said OPEC, which estimates 2020 demand to have crashed by 9.8 million bpd to average 90 million bpd.

The group was rather upbeat on demand trends in North America, despite the raging pandemic, noting that “The recovery in transportation fuels, including gasoline, is additionally linked to developments in the labour market and gasoline retail prices. The current outlook assumes a respectable recovery in both variables.”

In Europe, “Uncertainties remain high going forward with the main downside risks being issues related to COVID-19 containment measures and the impact of the pandemic on consumer behaviour. These will also include how many countries are adapting lockdown measures, and for how long.” OPEC sees China, the world’s largest oil importer, to continue to see solid growth in all economic sectors.