The United States/ Iran face-off has resulted in oil sanction, which in the long run may improve the earnings of many OPEC member states, including Nigeria, writes AKINOLA AJIBADE
Penultimate week, the United States (US) imposed a sanction on the oil-rich state of Iran, after weeks of threats and permutations on what would be the likely consequence of such action on the oil rich country. Iran is reputed to be the third largest member of the Organisation of Petroleum Exporting Countries (OPEC) and the global oil industry.
Fuelled by alleged failure of the Iranian government to respect the earlier agreements reached with the US and other world powers on the issue of producing nuclear energy for growth, the sanction as declared by the US government on November 4, this year, has generated discussion, among stakeholders in the value chain.
The reason being that the sanction coincided with when OPEC was duly guided to monitor oil supply quota allocated to countries that are its members, while at the sametime, placed a ceiling on the barrels of oil produced daily by some members, including Nigeria.
Coupled with this is the fact that the prices of crude oil are rebounding at the international market for the first time since the global oil market was hit by recession and its subsequent fall in the prices of crude oil. This development, which has delighted governments, as they believe that the development, if its continues, will enable them meet their fiscal responsibilities.
For instance, price of Brent crude recorded a four-year high in late September, this year, as it closed at $86.74 per barrel, a development that was greeted with excitements, globally.
Though the price dropped later to $84.75, per barrel, following the decision of the International Monetary Fund (IMF) to lower its forecasts, among other issues, the rise in price of crude was not an issue to be forgotten soon.
Days after, the price rose to $85 per barrel early October as the US continued its push to sanction Iran.
A university don, Prof Wunmi Iledare, said the sanction is flexible and as such will not have immediate effects on Nigeria.
According to him, the US imposed the sanction on Iran with some measures of flexibility by granting waivers to countries that buy crude from Iran.
He said China, India and five other countries are allowed to buy some barrels of oil from Iran, adding that the development suggested that the US did not outrightly ban those countries from buying Iranian crude.
Iledare said: “By allowing some countries to buy crude from Iran, however, small it may be, the US government has reduced the pressures, which the sanction would have on the global oil market and members of OPEC. “This means that those countries that the pressures or shocks, which the sanction is going to have on Iran and other members of the cartel, if it was outright sanction, has reduced. Based on this, the decision by the US to sanction Iran is not going to impact negatively on Nigeria.”
He said the increase in shortage and price of crude oil is expected to occur in the event that the sanction continued, adding that the issue is going to impact tremendously on the earnings of Nigeria, which relies on revenues from oil to sustain itself.
“If the ban on Iranian crude persists, obviously, it is a blessing to oil producing countries, especially Nigeria, which relies on crude oil exports for more than 70 per cent of its foreign exchange earnings. The sanction is a gain to some countries and a loss to others. While the countries buying the crude oil are going to pay more for the product, the oil producing countries are expected to make more money in the process,“ he said.
Iledare said Nigeria and Iran are members of OPEC, adding that unfavourable developments in one member state needed not cause major problem in other state or country.
He said Iran is a country, which is always resilient, as it moves from one crisis to another, adding that the issue may have little effect on its partners.
“ Obviously, there would be protests in Iran if the sanction continues, because Iranians would take to the streets to express their feelings.
“This may take the form of vandalism of oil installation, a development, which would affect production of crude and further cause shortage of the product. This is good for Nigeria that is eyeing increase in the price of crude to finance its fiscal responsibilities,“ he said.
Also, the former President, International Association of Energy Economist ( IAEA), Prof Adeola Akinnisibu, said many barrels of Iranian crude would still get to the market, as long as the US allows some countries to buy the product.
Akinnisibu said the issue is a good development for Nigeria, because the shocks on Brent crude, which is the country’s crude oil, would not be much.
He urged the Federal Government to put in place measures to improve oil production, adding that OPEC will soon exempt Nigeria from crude oil cut imposed on the country and Libya since last year.
According to him, developments in the global oil market have presented opportunities for Nigeria to plan ahead by exploring potentials in areas considered green fields for improved oil production. (The Nation )
