IMF forecasts fall in crude oil price, cautions oil producing countries on windfall

Solomon Ezeme

As major oil exporting nations continue to take advantage of the rising increase in global crude oil prices and up scaling their national oil revenues, the International Monetary Funds (IMF) has made a forecast that crude oil prices will decline  from  average of $106.83 per barrel in 2022 to $92.63 per barrel by 2023. This was contained in the IMF latest Regional Outlook.  

IMF forecast that Nigeria’s economic recovery growth will decline from 3.4 percent in 2022 to 3.1 percent in 2023.

According to the IMF, the growth crisis is caused by the Russian invasion of Ukraine which has triggered a global economic shock that is hitting Nigeria and the sub-Saharan Africa countries, at a time when countries’ policy space to respond to it is minimal to nonexistent.

The Fund said the surging oil and food prices are straining the external and fiscal balances of commodity-importing countries and have increased food security concerns in the region.

The IMF therefore urged the Nigerian government and others to take decisive policy action in order to enhance economic diversification, unleash the private sector’s potential, and address the challenges posed by climate change.

The IMF in the Outlook urged the Middle East and Central Asia countries to prepare to benefit from a projected oil revenue windfall of $818bn (an increase of $320bn from its October 2021 project) due to the impact of Russia’s invasion of Ukraine and the resultant rising global demand for energy.

The Fund warned oil exporters within the region to be mindful of over dependence on the current windfall, noting that oil prices are expected to fall as 2023 approaches.

EnergyDay recalled  that the disruptions in trade and production as a result of Russia’s invasion of Ukraine have increased the cost of commodities, causing oil international prices to remain above $100 a barrel since the war began in late February.

It advised the nations, which includes members of the Organization of the Petroleum Exporting Countries (OPEC), to formulate policies that would “improve fiscal and external balances” and ensure their economies are less vulnerable to the effects of possible bearish trends in the international prices of crude oil.

EnergyDay’s check revealed that Nigeria is losing out on the crude oil windfall due to oil theft and pipeline vandalism that has affected and reduced its oil production volume, overtime.

Earlier, in its April 2022 Commodity Markets Outlook report while highlighting the impacts of the ongoing Russian-Ukraine war on the global commodity market, disclosed that Nigeria has a daily shortfall of 500,000 barrels of crude oil.

The report claimed the country had also failed to meet oil production targets set for it by OPEC for 2022.

It said Nigeria failed to meet the 1.8 million barrels per day oil production quota set by the Organisation of Petroleum Exporting Countries in the month of February 2022.

However in January 2022, Nigeria was only able to produce about 1.46 million barrels per day (bpd) out of the 1.683 million bpd set by OPEC; while its total production stood at 1.258 million bpd in February 2022 when its OPEC target was pegged at 1.8 million bpd.

The National Assembly on April 14, approved a proposal by President Muhammadu Buhari for a new oil production volume of 1.6 million bpd from 1.883 million bpd earlier stated in the 2022 fiscal framework, considering both the rising oil prices in the international market and the internal challenges of oil theft and vandalism.

EnergyDay had earlier reported that the NSCDC arrested 69 oil thieves engaged in the operation of illegal oil refineries in Akwa Ibom State, between January and December, 2022.

Tony Elemelu, Chairman of UBA Banking Group and Heirs Holdings, had also revealed that the height of criminality in the Niger Delta region of Nigeria, especially at the Bonny Terminal, has gotten to the point where the nation loses about 177,000 barrels of crude oil to oil thieves daily. Elumelu stated that the nation was “losing over 95% of oil production to thieves” as only about 3,000 bpd eventually gets to the terminal, daily.

Recently, President Buhari directed security agencies to go hunt down operators of all illegal refineries both in Imo State after a gory incident that claimed the lives of over 100 people as a result of an explosion at an illegal oil refinery in Abaezi forest in the state, on Friday,

However, in a bid to join other countries who are already taking advantage of the windfall created by the Russian-Ukraine crisis, the President has made a promise to Nigerians that his government was ready to tackle crude oil bunkering and improve oil production level in the country.