Nigeria’s new National Assembly convened this week, and heard a stark message from the country’s new president Muhammadu Buhari: There’s no money left.
There may be more than a little politicking in this, allowing the blame to be allocated backwards, to the previous government of Goodluck Jonathan, but the situation does look pretty grim. And it has reached this point in no small part because, in the great oil market shake-out of the past decade, there are fewer hard luck stories than that to be told by Africa’s largest producer.
Around 10 years ago, Nigeria’s production peaked at near 2.5mn b/d. But what has come since then is a salutary tale. Four years of violent uprisings in the Niger Delta forced oil companies operating there to withdraw staff and crimp production. Output has recovered a little from its 2009 lows, but supply disruptions continue and endemic theft has reached staggering proportions.
In the days of $100/bl crude, Nigeria’s woes were all domestic. What it would give for that still to be the case. Instead, it is now beset on all sides. In March 2007, around 1.3mn b/d of Nigerian crude was imported by the US. In the same month this year, the total was so small as to be negligible. Somewhere around 100 b/d, to be as precise as possible — literally a drop in the vast new US oil ocean — and that is an improvement from the all-time low hit in February.
In Europe — which has helped Nigeria replace lost US sales in the last few years and become one of the country’s main markets — there is no shortage of the kind of light, sweet crude Nigeria can provide. And the latest import figures from Beijing make for grim reading in Abuja. Imports of Nigerian crude by China in May were half those of a year ago. In the first five months of 2015, China’s Nigerian crude imports were 64pc down on a year earlier.
A key market for Nigeria’s light sweet crude is now India, where demand is at least holding up. And Nigeria has been seeking new markets, with tentative steps in Latin America, to offset its massive loss of sales to the US.
Still, the crude keeps pumping in the Delta. The provisional August loading programme indicates a scheduled month-on month rise in exports, even though there is an overhang of unsold July cargoes struggling to find buyers. There were around 20 unsold cargoes of June and July-loading Nigerian crude available last week, and the surplus of light sweet crude in the Atlantic basin has weighed heavily on the price of Nigerian grades relative to benchmark North Sea Dated.
At home, passage of the long-delayed petroleum industry bill will be a priority for Buhari. Another priority is the need to tackle the endemic corruption that has led to huge losses in revenue from oil exports. Dealing with corruption would go some way to refilling the depleted treasury coffers.
For more information, please contact OilBlog@argusmedia.com