The crude production target of 2.3 million barrels per day proposed in the 2018 budget will not be achieved because of acts of sabotage in the lead-up to the 2019 elections, FBNQuest Capital has predicted. FBNQuest, which made this assertion in its newly-released Economic Outlook, projected that oil output will average 2.07mbpd this year, as against 1.90 mbpd of 2017, due to expected disruption in production as activities towards the 2019 elections rev up.
It, however, acknowledged that production had been in the upswing since mid-2017 with the federal government’s fruitful effort to settle volatile issues in the Niger Delta.
“We see average output (including condensates) this year at 2.07 mbpd, compared with 1.90 mbpd in 2017 and the assumption of 2.30 mbpd in the 2018 budget proposals,” FBNQuest, which is an arm of FBN Holdings Plc., stated. “We have made allowances for some acts of sabotage in the run-up to elections. However, the broad trend in production has been upwards since mid-2017, and the FGN is maintaining its conciliatory approach in the delta. Also, Total’s deep offshore Egina oilfield is due to start production in Q4 at 200,000 b/d.”
It stressed, “There is metering of production in operation but it is carried out at export terminals by several agencies employing different methodologies. Consequently, there is no single unified official data source for production. This makes Nigeria unique among large-scale oil producers. It also places question marks around the value of all official planning and budget activity.
“We have, therefore, to choose from a number of data sources, including the NNPC, the CBN, Reuters, Bloomberg, the EIA in the US, and OPEC. Our favourite is the data series in the corporation’s monthly Financial and Operations Report.”
FBNQuest emphasised that on the basis of the expected further rise in crude output, to an average of 2.07mbpd, from the previous year’s 1.90 mbpd, it predicted a GDP growth of 2.4 per cent this year. Besides, the investment banking firm stated that it saw the non-oil economy in “better shape” in the second half of this year, marked by less restricted household budgets.
Stating that its call for 2018 would not be complete without a view on the naira exchange rate, FBNQuest stated, “The CBN’s unorthodox FX policies, which were first outlined in a circular in February 2017, have exceeded expectations (including its own).”