David O. Kuranga, Ph.D.
Even before sanctions on Iran are lifted, global oil prices have fallen to 30 dollars, with indications that prices are far from reaching their lowest levels. OPEC has agreed to keep pace with production, with leading members requiring that non-OPEC countries agree to reduce production before the bloc can agree to change course. Shale producers in the US, and non-OPEC countries are all behaving like “free-riders”. They all want the benefits of OPEC stepping in to regulate prices so that they can increase revenues, yet they do not want to carry their share of the load. Fixing the oil-price problem is a task that OPEC cannot be expected to do alone, after all the block only contributes about 40% of the worlds total oil supply. The remaining 60% is contributed by producers in many other countries, including Russia, China, Mexico, Canada, Norway, Brazil, Indonesia, Oman, USA, and many others, particularly in Africa.
As the current President of OPEC, Nigeria has the responsibility to do something to try and remedy the stalemate between OPEC and non-OPEC nations. If Nigeria does nothing, history will judge our country, and our failed leadership at a critical time in the world. Bridging the gap, will not be easy, and may not even be possible. For a deal to work, officials from Russia, China, Mexico, Norway, Brazil, Indonesia, Oman, and many other smaller producers all have to agree in principle to limit their production over the next 6-12 months. In addition, private shale firms in USA & Canada, who are all being hurt and even shuttered as a result of the collapse, must also come to the table and agree to verifiable production limits. The first step in doing this will be to bring everyone to the negotiation table. It is the responsibility of President Buhari himself, who insisted on making himself oil minister, along with his deputy Kachikwu, to set up this grand meeting between OPEC members, and other like-minded non-OPEC oil producers.
Given the failure and inability of the organization to address the issue of global oil prices over the last year under Nigeria’s leadership, or the lack thereof, the very existence of the organization is now at risk. What the media and western decision-makers and commentators have all tried to do is to place the blame at the doorstep of Saudi Arabia and other gulf oil producers. Everyday there is some “analyst” placing the blame of the global oil route and the responsibility to fix it on OPEC and particularly its more prominent members. What this does is ignore the role that private sector producers in the US, as well as decision-makers in other oil producing nations should rightfully play in resolving the situation, as they too are part of the problem. Nigeria’s oil minister, Kachikwu, recently indicated that a meeting of OPEC members may occur soon, it is not clear if he as the president of OPEC has made any attempt whatsoever to bring non-OPEC producers, both private and public, to table to try and collectively reach some kind of tentative agreement for at least 6 months.
Nigeria cannot resolve the crisis alone, neither should it be expected to. Still this is a golden opportunity for Nigeria to lead the world in this time of crisis. Breaking the stalemate will do a lot to change the narrative on the role of Nigeria and Africa in global affairs. As the current leader of OPEC, Buhari and Kachikwu must realize that OPEC’s failure is Nigeria’s failure, and their lack of global leadership at this critical juncture is totally unacceptable. A global agreement on oil may not be possible, but certainly a simple meeting to discuss the possibility of a temporary agreement between OPEC and non-OPEC oil producers seems very attainable given the anxiety among all major stakeholders. It is the prerogative of Nigeria to make this grand meeting happen, quite possibly even on Nigerian soil.
*The author is the Managing Director and Principal of Kuranga and Associates, a full-service investment, political and economic risk consultancy, and asset management firm that specializes in Africa. He is also the author of The Power of Interdependence with Palgrave Macmillan Press. Kuranga and Associates Limited is an investment management advisory firm and an asset manager with a principle practice area of Africa. To learn more about Kuranga and Associates go to www.kaglobal.net.