Nigeria’s Oil Production Capacity Leaps Marginally

Nigeria produced a total of 66.49 million barrels of crude oil and condensate for the month of January 2016, which represents an average daily production of 2.14 million barrels per day.
This represents an increase of about 2.97 per cent, relative to December 2015, according to a report by FSDH Merchant Bank Limited.

Of the January 2016 production level, Joint Ventures (JVs) and Production Sharing Contracts (PSC) contributed about 29.89 per cent and 42.84 per cent respectively. Other production arrangements accounted for 27.27 per cent.

According to the data from Thomson Reuters, the Bonny Light oil price climbed by 4.75 per cent to $38.37/b as at end-March 2016, from end-February 2016. However, the average price of Bonny Light was $38.91/b in March 2016, an increase of 17.80 per cent from the average price of $33.03/b recorded in February 2016.

The FSDH monthly economic report for March 2016, noted that foreign exchange restrictions put in place by the Central Bank of Nigeria (CBN), continued to insulate the external reserves from a sharp draw down from excessive demand in March 2016.

The external reserves increased marginally by 0.14 per cent to $27.86 billion as at end of March 2016, compared with end-February. However, there has not been a consistent accretion to the external reserves because of the consistent low oil price. It also noted that the fragile external reserves position undermined the ability of the CBN to defend the value of the Naira.

“The combination of external factors and domestic shocks contributed to the increase in the inflation rate into double digit in February 2016. The inflation rate in February 2016 increased to 11.38 per cent, from 9.62 per cent in January 2016. The inflation rate in February 2016 was due to the faster pace of increase in all major divisions of the Headline Index.

“The inflation rate may remain in the double digits in the short-term. The downside risk to single digit inflation rate still comes from the inadequate supply of petroleum products and the weak Naira. The inadequate infrastructure and power supply also have a tendency to keep the inflation rate in double digit. We estimate that the inflation rate would increase to 11.76 per cent in March 2016,” the report added.

However, in a separate report, the Financial Derivatives Company Limited (FDC), predicted that inflation would likely cross the 12 per cent threshold. Precisely, the firm projected a significant increase of 0.7 per cent in the March inflation number to 12.1 per cent.


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