By Ejiofor Alike in Lagos and Omon–Julius Onabu in Asaba with agency report
Nigeria’s dwindling oil revenue is expected to fall further as Iran is set to commence immediate exports of at least 500,00 barrels of crude oil per day (bpd) following the lifting of international sanctions against the country at the weekend, thus worsening the oil glut in the global market.
The federal government’s 2016 budget, which is predicated on an oil price of $38 per barrel, is already under threat as crude oil prices fell below $30 last week due to an estimated 1.5mbpd excess inventory in the oil market.
With the lifting of sanctions against Iran, the additional one million barrels per day that the country is expected to add to the global market this year will depress prices further, thus worsening Nigeria’s already precarious economic situation.
The United Nations Nuclear Agency on Saturday certified that Iran had met all of its commitments to curb its nuclear programme, and the United States immediately revoked sanctions that had slashed Iran’s oil exports by around 2mbpd since their pre-sanctions 2011 peak to a little more than 1mbpd.
There were strong feelers a month ago that the removal of sanctions would occur earlier than oil traders initially expected.
This fuelled a sell-off which sent the price of Brent crude tumbling 24 per cent since the beginning of the year, the biggest fall since the financial crisis of 2008.
Iran has said that it hopes to increase its post-sanctions crude exports by around 1mbpd within the year.
UK-based Independent newspaper reported yesterday that Iran was set to flood the oil market with 500,000bpd after international sanctions were lifted in a move that has been hailed by the country's president as a “golden page” in its history.
President Hassan Rouhani was quoted as saying that the deal “opened new windows of engagement with the world” and the country should “get ready to seize the opportunity to make an economic leap and development”, while speaking in Parliament yesterday.
Hours after sanctions imposed by US, UN and the EU on Tehran were lifted - thereby removing the obstacle to exports - the Deputy Oil Minister, Amir Hossein Zamaninia, announced that his country was ready to increase its crude oil exports by 500,000bpd.
“With consideration to global market conditions and the surplus that exists, Iran is ready to raise its crude oil exports by 500,000 barrels a day,” Zamaninia was quoted as saying by the Shana news agency.
Already there are some 38 million barrels of oil in Iran's floating reserves ready to enter the market, according to the International Energy Agency (IEA).
Rouhani said Iran should use the expected influx of money and investments following the end of sanctions to spark the “economic mutation” of the country, creating jobs and enhancing the quality of life for Iranian citizens, after the country suffered double-digit inflation and high unemployment rates for years.
Rouhani said his country needs up to £35 billion in foreign investment annually to reach its goal of 8 per cent annual growth.
More than £21 billion in assets overseas were understood to become immediately available to the Islamic republic, while official Iranian reports have set the total amount of frozen Iranian assets overseas at £70 billion.
But as Iran prepares to re-enter the oil market, Nigeria’s problems may be compounded by fears of rising militant attacks on oil installations in the Niger Delta.
A few hours before a Federal High Court in Lagos ordered the arrest of former militant, Mr. Government Ekpemupolo, also known as Tompolo, who is being prosecuted by the Economic and Financial Crimes Commission (EFCC) on allegations of corruption and money laundering, the Escravos gas pipeline operated by US multinational, Chevron, was blown up in the Niger Delta.
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