As oil prices rebound and shale oil producers in the United States adopt a more strategic approach, Nigeria faces renewed challenges reminiscent of the 2014 supply glut. The Nigerian government anticipates making N7.69 trillion from oil revenue to support the 2024 budget of N27.5 trillion. However, the increasing shale oil production, reaching a record of 13.24 million barrels per day in September, is a cause for concern.
The situation echoes the 2014-2016 period when Saudi-led OPEC retaliated against US shale, causing a significant drop in oil prices. While the US producers are more resilient now, Saudi Arabia may be hesitant to risk a repeat of austerity measures prompted by the oil price crisis in 2014.
Analysts suggest that the Saudis may either open the taps to curb US shale growth or continue with production cuts. The resurgence in US oil production poses risks, potentially increasing fossil fuel demand amid global efforts to combat climate change. President Joe Biden, despite initial promises to transition to renewable energy, has urged oil companies to boost production to lower consumer prices.
The shale boom has transformed the US into a major oil competitor, impacting Nigeria’s oil exports. If the shale boom slows down, it could lead to a surplus in the global oil market, resulting in lower oil prices that would adversely affect Nigeria’s economy. Nigeria needs oil prices to rise or remain steady to achieve its ambitious revenue goals for the 2024 budget.
The proposed oil revenue for 2024 is more than triple the amount budgeted for 2023, highlighting the government’s reliance on the oil sector despite challenges such as oil theft and infrastructural deficits. The potential impact of the resurging shale oil production underscores the volatility and uncertainties in Nigeria’s oil-dependent economy.
