While Nigeria’s crude output barely covers petrol import despite the increase in the price of crude oil, Saudi Arabia, a fellow crude oil producer has realised an almost 10-percent expansion of its GDP over the first quarter of the year as a result of a sustained rally in oil prices, according to official data.
The country’s deficit is set to rise to 4.5% of GDP this year due to the fuel subsidy, up from an original estimate of 3.42% in the budget.
Nigeria’s situation has been attributed to the bad policy which has sustained fuel subsidies and the lack of political power to curtail the menace of crude oil theft which has led to the country not being able to produce even the quota allocated to it. By OPEC+
At 9.9 percent, the Kingdom’s economic growth during the quarter is the highest since the third quarter of 2011, Al Jazeera reported.
“This growth is due to the high increase in oil activities by 20.3 percent,” the Saudi statistics authority said.
Aramco reported a net profit of $39.5 billion for the first quarter, thanks to higher oil prices. This was an 82-percent annual improvement and a record quarterly profit for Aramco since it went public three years ago.
As a percentage of total GDP, oil and gas accounted for 32.4 percent and was the highest contributor to growth during the reporting period. Non-oil activities increased by an annual 3.7 percent in the first quarter
The minister of Finance, Zainab Ahmed in an interview at the World Economic Forum in Davos that she hoped Nigerian oil production would average 1.6 million barrels per day (bpd) this year, up from around 1.5 million bpd in the first quarter.
The government had budgeted 1.8 million bpd of production, Ahmed said, blaming crude theft and attacks on oil infrastructure for the shortfall
“We are not seeing the revenues that we had planned for,” Ahmed said. “When the production is low it means we’re … barely able to cover the volumes that are required for the (petrol) that we need to import.”
Nigeria exports crude oil and imports refined petrol, suffering intermittent fuel shortages. It faces double-digit inflation and low growth, amid a shrinking labour market and mounting insecurity.
A plan to abolish its petrol subsidy was scrapped ahead of national elections in February 2023 and $9.6 billion was added to planned spending to cover it, putting pressure on the budget.
Nigeria raised $1.25 billion via a Eurobond sale in March at a premium rate and had planned to issue another bond. But Ahmed said the government had “not seen a good opportunity to go in.”
Nigeria’s central bank surprised markets this week by raising its main lending rate by 150 basis points to 13%, after inflation rose to 16.82% in April, the highest in eight months.
Aramco reported a net profit of $39.5 billion for the first quarter, thanks to higher oil prices. This was an 82-percent annual improvement and a record quarterly profit for Aramco since it went public three years ago.
As a percentage of total GDP, oil and gas accounted for 32.4 percent and was the highest contributor to growth during the reporting period. Non-oil activities increased by an annual 3.7 percent in the first quarter.
“The underlying data still points to a healthy pace of expansion in the non-oil sector,” according to Monica Malik, chief economist of Abu Dhabi Commercial Bank, who spoke to Al Jazeera.
“Saudi is in a very strong position, given the limited global oil capacity and the high oil prices,” she added.
The strong performance of Saudi Arabia’s oil industry is set to continue as the world supply remains tight. The Kingdom recently raised its official selling prices for almost all buyers of its crude for July deliveries, with the increase most substantial for Asian buyers.
Meanwhile, however, Saudi Arabia also committed, alongside OPEC+, to boost monthly production by almost 650,000 bpd combined net month and in August, up from an originally agreed 432,000 bpd.
So far, this has failed to have any negative effect on oil prices because, besides Saudi Arabia and a couple of other Middle Eastern producers, OPEC members are finding it hard to pump as much as originally agreed.
Olusola Bello