In the first quarter of 2024, the average market price of Nigerian reference crude oil (bonny light) was $85.68, which is $7.72 more than the benchmark price of $77.96 set forth in the 2024 Appropriations Act.
Data from the Central Bank of Nigeria (CBN) statistics bulletin for the first quarter of 2024 support this.
The research states that in January 2024, the average spot price of Nigerian reference crude was $82.18. The spot price was $88.80 in March and $86.08 in February.
When compared to the preceding quarter of Q4, the average spot price of Nigeria reference crude oil decreased from $86.61 from the figure recorded in Q1, 2024. On the other hand, the average spot price of crude oil increased by $1.70 from $83.98 in Q1, 2023 to $85.68 in the quarter under review.
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Despite high crude oil prices in the first quarter of the year, Nigeria did not get optimal benefits as crude oil production remained below the 2024 budget target. In January, Nigeria’s average crude oil production stood at 1.42 million barrels per day according to the Organisation of Petroleum Exporting Countries (OPEC) monthly oil market report.
The crude oil production in the remaining months of the quarter followed similar patterns – both below the OPEC production quota and 2024 budget benchmark. Average crude oil production in February stood at 1.32 million barrels while that of March was 1.23 million bpd.
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In recent years, Nigeria has experienced a decline in crude oil production due to rampant theft, divestment by major oil companies from onshore fields, and a lack of investment in the industry.
Reduced crude oil production hampers the federal government’s efforts to raise revenues for its budget execution. It also adversely impacts the Central Bank of Nigeria’s (CBN) ability to increase foreign exchange liquidity, which is crucial for supporting the value of the naira.
Global crude oil prices increased significantly in the first quarter of the year on the back of Russia-Ukraine conflict disrupting global oil supplies, and providing price support.
Additionally, global economic conditions, including inflation concerns, monetary policy decisions, and geopolitical tensions in oil-producing regions, significantly influenced oil price movements during the quarter resulted in WTI crude rising by 14% during the period.
Oil prices were further bolstered by several OPEC countries, including Saudi Arabia, Iraq, the United Arab Emirates, Kuwait, Kazakhstan, Algeria, and Oman, which extended voluntary production cuts totaling 2.2 million barrels per day to maintain oil market stability.
Moreover, Russia committed to a voluntary production cut of 471 thousand barrels per day for the second quarter of 2024, along with a reduction in exports.
