By Olisemeka Obeche
Nigeria’s search for urgent remedy to the plummeting oil price prompted President Muhammadu Buhari’s week-long diplomatic shuttle to Qatar and Saudi Arabia in late February. Buhari reportedly held talks with King Salman Bin Abdulaziz Al Saud and senior officials of the Kingdom of Saudi Arabia and later with the Emir of Qatar, Sheikh Tamim bin Hamad Al Thani on how to address the issue of ‘over-supply’ fueling the crude oil price slump.
Buhari’s trip to Riyad and Doha came as Saudi Arabia, Russia, Qatar and Venezuela agreed to freeze oil output at near-record levels as part of the first coordinated move to counter the slump that has pummeled economies, markets and companies. The Saudi-Russian freeze deal is the first significant cooperation between members of the Organization of Petroleum Exporting Countries (OPEC) and the non-OPEC producers in 15 years. The Buhari-led diplomatic team hoped to latch on to such move for further action that could ease global oil supply glut.
The present administration has faced increasing challenges in meeting its electoral promises as well as funding the 2016 budget as oil prices slumped to more than 70 per cent at $30 a barrel over the past 18 months. Saudi-led OPEC had sought to drive higher cost producers out of the market by refusing to cut production despite a supply glut.
Nigeria, Venezuela and other countries who depend heavily on revenue from crude oil sales have been worst affected by the fall in prices while even Saudi Arabia, with enviable foreign reserves, is said to be shoring up its resources to withstand the revenue drop. And with the austere economic situation already causing more pains across the country, Buhari has turned to top oil exporters to help engineer a quantitative easing that could allow oil price to firm or rise.
The Federal Government has been canvassing for OPEC to review its production quota in a bid to ensure global oil price stability since the cartel’s daily oil basket price fell to $30 per barrel. The oil price slump remains one of the biggest threats facing the Buhari government with national earnings reportedly dropping at a fast rate; and analysts say further drop could spell doom for the country.
The Minister of State for Petroleum Resources and OPEC President, Dr Ibe Kachikwu has revealed that there was a lot of push from various blocs within OPEC gunning for a change in its output strategy. With OPEC’s next emergency meeting slated for this month (March), Buhari’s trip to the two influential Gulf countries is part of the new strategy to secure the much needed policy reprieve that could see the cartel ease its supply.
Kachikwu hinted that a new collaborative effort among OPEC member- countries to address the global oil price decline is afoot. He added that they have also been meeting the non-OPEC members to be on the same page. He believes that this would be the linchpin to actualizing the much needed price stability. “As you get closer to the statutory (OPEC) meeting dates … you are going to see a lot more people get active in those conversations and try to find solutions,” the minister said.