The Nigerian economy which relies on the exportation of oil is likely to experience new challenges arising from the departure of United Arab Emirates, an OPEC member, from the organization.
United Arab Emirates, one of the leading member states of OPEC, is set to leave OPEC in May due to re-evaluation of its own policy regarding production. It has been made clear that the reason behind such a decision is related to national interests in addition to responding to the demands of the international oil market.
It has been stated by analysts that the departure might lead to instability in the oil market. As a result of operating beyond OPEC’s quota, the UAE will produce additional oil causing a fall in the price of crude oil in the international market.
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Without these recent developments, the country was producing around three and a half million barrels per day. The UAE can boost its oil production significantly without such limitations and will increase competition on its main export destinations, especially in Asia, where Nigeria also exports its products to.
Energy analyst Ayodele Oni stated that the move will result in price instability within the oil industry. He explained that when there is more oil produced worldwide, there will be price fluctuations and low pricing, which could decrease the profits of Nigeria.
On the other hand, Oni added that Nigeria can capitalize on the situation since it can request an increase in production within OPEC or raise production independently if issues with infrastructure and security were resolved.
