Nigeria Could Lose N333bn By Year End :US-Iran Deal

Nigeria could lose about N333billion in crude oil revenues by year end, following the nuclear deal reached with Iran by world powers on Tuesday July 14, 2015.

The reduction in earnings will come from a further drop in crude oil prices in the international market, due to an exercabation of the supply glut, as Iran increases its crude oil exports, resulting in lower demand by Nigeria’s clients.

Crude oil prices have fallen by 9 percent from $59.81 per barrel on July 1 to $54.55 on July 14 2015. The slide was attributed to the instability in the Chinese stock market, along with the anticipated surge in oil production in the United States, as well as high expectation that a compromise would be reached on the Iranian nuclear stalemate.

At the current production level of 1.903 million barrels per day, Nigeria would have earned about $19.23 billion for the remaining 169 days in 2015 had the prices hovered around July 1 prices, as against $17.54 billion, based on July 14 prices. This will translate to $1.69 billion or N333.26 billion in loss to the nation.

The Iran nuclear deal is coming at a time Nigeria’s receipts from crude oil sale have maintained a downward trend.

Earnings by Africa’s largest crude oil producer, Nigeria, fell by 26 percent in February, to N359.7 billion, down from N486.4 billion which the nation earned in January 2015. Revenue marginally picked up by 1 percent in March to N364.6 billion before it fell significantly by 22 percent in April this year, when Nigeria made N286.2 billion.

Meanwhile, South Africa has indicated its interest to buy crude oil from Iran immediately sanctions are lifted and this has implications of less patronage for Nigerian crude. According to Bloomberg, Maite Nkoana-Mashabane, South Africa’s international relations and cooperation minister was reported to have said “If sanctions are lifted on oil imports, that’s a win-win situation and we would like to benefit from that.”

Rolake Akinkugbe, an Energy analyst with FBN Capital , said “ It’s very likely that Iranian exports will ramp up significantly over the 12 months .Iranian crude has historically been attractive in the Asian market, given the ability of refineries there to process it”.

Akinkugbe however said it’s not necessarily all immediate gloom for African producers like Nigeria, adding that while Iranian oil was offline, its supplies to Asian refiners were replaced by a mix of crude from Nigeria, Russia, the UAE, Iraq and Venezuela.

So even Iran may have to offer some massive discounts on its crude to lure back Asian buyers she said.

South Africa bought 51.148 million barrels of crude oil from Nigeria in 2014 accounting for 52 percent of the 98.87 million barrels Nigeria sold to its crude oil buyers on the African continent.

Analysts have also predicted a rise in the volume and value of deals that will go into the Iranian oil and gas sector. According to the Financial Times, “European oil majors such as Royal Dutch/Shell and Italy’s Eni have already visited Tehran, with a view to clearing old debts and paving the way for new deals.” This is in contrast to divestments from Nigeria by international oil companies (IOCs).

It would be recalled that due to reduced earnings from crude oil exports, about 23 state governments of the federation had problems paying salaries to civil servants and had to be bailed out recently by the Federal Government.

Source: http://businessdayonline.com/2015/07/us-iran-deal-nigeria-could-lose-n333bn-by-year-end/#.Va4CJtxViko

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