Nigeria is facing a serious revenue as prices of crude oil have been crashing at unprecedented levels, especially Nigeria’s headline crude, Bonny Light, despite the revised 2020 budget.
According to information from Oilprice.com, the Bonny light crude crashed by over 29 per cent to sell at $14.75 per barrel on Tuesday, April 21, 2020. The massive downturn and the volatility of the oil market have continued to seriously threaten the Federal Government’s revised 2020 budget, which has an oil benchmark of $30 per barrel.
This is further compounding the financial problem being faced by both Federal and State Governments in the face of adverse impacts of the Coronavirus pandemic.
The value of crude oil plunged and storage tanks around the world became scarce just days after measures were adopted by major oil producing countries to take care of the issues of declining oil prices and lower demand all resulting from the COVID-19 pandemic.
Crude oil in Nigeria, Oil producing states in Nigeria, Department of Petroleum Resources, DPR yet to recognise Anambra Enugu and Kogis States as oil producers, West Africa’s crude inventory is building up as demand slows due to Coronavirus, Oil at $26, as Saudi Arabia in no retreat no surrender oil battle with Russia, Crude oil prices fall to $30 as COVID-19 erases gains from oil production cuts, Bonny light crude oil crashes as Nigeria runs into deeper revenue crisis
In the meantime, analysts have forecast that the historic low demand and supply gluts will continue to strain storage capacities, thereby giving little hope of oil price recovery.
Even with the output cut by OPEC+ and some oil-producing countries, analysts believe that the recovery of the oil market will take time, as it will only start easing off when the solution to the Coronavirus pandemic starts to record success.
Meanwhile, OPEC and non-OPEC members are set for another conference where oil ministers will discuss the global oil market as plunging demand crushes prices. Note that Brent crude is selling for less than $19 per barrel, even as OPEC basket is selling for $14.19 per barrel.
The country still has a lot of unsold cargoes as demand remains very low. In fact, Nigerian crude was sold at a discounted price of $12 per barrel a few days ago due to decline in interest by buyers to purchase crude cargoes, accumulated inventory and low oil demand due to lockdown and restrictions of businesses and households because of covid-19.
Nigeria’s crude oil export was also cut by 400,000 barrels per day following the deal by OPEC+ and other oil-producing countries in a bid to stabilize the market.
The dangerous exposure of Nigeria to the crude oil price crash and low demand globally will be a huge blow to the country’s ability to meet its revenue target for the revised budget, lead to more pressure and instability in the country’s foreign exchange market, have a negative effect to different upstream projects in the country.
