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Nigeria’s crude oil output dropped 3.8 per cent in February at
2.098m barrels per day (bpd), though it remained Africa’s top oil producer,
outperforming Angola (1.704m bpd), Libya (1.347m bpd), and Algeria (1.261m
bpd).

In its March Monthly Oil Market Report released this week, the
Organisation of the Petroleum Exporting Countries (OPEC) estimated the nation’s
crude oil output at 2.098m barrels per day (bpd) in February, from 2.181m bpd
in January, and 2.192m bpd in December.

Samir Gadio, Emerging Market strategist, Standard Bank, says
these statistics seem to suggest that a sizeable increase in production in the
short-to-medium term looks somewhat unlikely, until new oil fields come on
stream and the existing infrastructure operates at a higher capacity.

“Although last month’s output was still up 7.4 per cent year on
year, the annual growth rate in the data flattened further, in line with our
expectations, given the sharp rebound and subsequent stabilisation in output
since November 2009, as the security situation in the Niger Delta region
broadly improved. Additionally, the average crude oil production (2.139m bpd)
has edged up 8.5 per cent year on year said,” Mr. Gadio said.

“Overall, the turnaround in output since late 2009 as well as
the rally in the Bonny Light oil price in 2011 should theoretically translate
into a significantly positive trade balance and robust current account
surplus,” he added.

Foreign reserves
accretion

Experts believe that the surge in the oil price (and a somewhat
stable output) is translating into an increase in foreign exchange reserves,
which reached $35.9 billion on 10 March 11, up from $3.6 billion.

“Although it is difficult to estimate the breakdown in the
accumulation of foreign exchange reserves between Central Bank’s monetised
proceeds and the Excess Crude Account (ECA), it is worth stressing that the
finance minister, Olusegun Aganga, indicated in February that oil-related
savings had resumed this year.

“In this case, we should see a rapid rebound in the ECA balance,
given the substantial differential between the current oil price and the
proposed oil price benchmark in the draft of the 2011 budget ($65 per barrel),”
Mr. Gadio further said.

World economic growth remains robust and continuing improvements
have led to improved growth expectations for 2011, which have been adjusted 0.1
per cent higher to 4.0 per cent, according to the OPEC report, though inflation
is beginning to pose a challenge for policy makers in both the OECD and the
developing countries.

Afrinvest, a finance research and analysis firm, said the
government has offered to increase its crude oil production, on OPEC’s request,
to cool soaring oil prices.

“Oil prices last week rose to their highest point in more than
two years, as the social unrest in Libya reduced global supply by as much as
1.0 million barrels per day. Nigeria’s Bonny Light is similar to the type of
oil produced by Libya and would be a good replacement for refiners, who are
currently lacking adequate supplies because of the North African crisis.

“Nigeria has a combined crude oil and condensate output of
around 2.4m bpd, with a production capacity of around 3.0m bpd,” the firm said.