Mixed blessings for Nigeria as crude oil prices crash
A worker inspect facilities on an upstream oil drilling platform at the Total oil platform at Amenem, 35 kilometers away from Port Harcourt in the Niger Delta. Amenem is the hub of Total oil production with two oil well producing over 100,000 barrels of crude daily. AFP PHOTO / PIUS UTOMI EKPEI (Photo credit should read PIUS UTOMI EKPEI/AFP/Getty Images)


Nigerians may soon see a downward trend in the pump price of petroleum products as prices of crude oil in the international market after four consecutive weeks of losses pushed both Brent and WTI to their lowest levels since July 2023.

While motorists and fuel users are expected to heave a sigh of relief when imported petroleum problems ordered in the last three weeks of November start to land in the country from December, the continued slide in the prices of crude and the resultant loss of revenue is causing anxiety among the nation’s economic managers, Business Hallmark can report.

On Thursday, November 16, oil prices declined to their lowest level since July 2023.

For instance, while West Texas Intermediate (WTI), also called Texas Light Sweet fell to $73 per barrel, Brent ended a fourth consecutive weekly loss, closing at $76.88 a barrel at the end of trading on November 16.

Oil prices, however, recovered slightly at the close of trading on Friday, November 17, ending the day at $80.61.

According to reports, the slight recovery can be attributed to several factors, including Saudi Arabia’s reaffirming its commitment to oil supply cuts until the end of the year; slowing economic output in China and India, as well as economic data from the US where the labor market seems to finally be cooling off.

Meanwhile, the fall in the prices of crude oil is creating fresh concerns for the Federal Government, sources in government confirmed to our correspondent at the weekend.

According to the sources, the nation’s economic managers had hoped that the spike in crude oil prices in the international market will continue to compensate for the shortfall in production caused by oil theft and pipelines vandalism.

“Though oil production had been on the rise since the time of former President Muhammadu Buhari, the country had not really gained from the boom in crude oil.

“What we gained on one hand from crude price appreciation, we lose through the other hand from low production.

“Until recently, Nigeria have been loosing about half of its oil production and proceeds to crude shut ins, thefts and vandalism.

“Even with the current production rate of between 1.35 million to 1.4 million barrels per day, we are still about 400,000 short of our OPEC quota.

“At today’s price of $80.61 per barrel, the country is still losing around $32,244,000 daily or $967,320,000 monthly (N35.8billion per day and N1.07 trillion monthly) at the official exchange rate.

“The loss is massive. However, it had been tempered by the appreciable improvement in oil production in recent times”, one of the sources who demanded anonymity told our correspondent.

BH analysis of the 2023 budget showed that the Federal Government had initially put crude oil benchmark at $70 per barrel.

However, It was further raised to $75 per barrel by the National Assembly after the budget appropriation bill was passed into law in December 2021.

Meanwhile, crude oil sold for $74/barrels per day on average in May 2023, before it started to appreciate, hitting a high of $97.2 in September.

This has allowed the government to gain back what it was losing through thefts and vandalization of oil assets.

However, last week’s crash in the prices of crude oil is threatening to put spanners in government’s bold plans to reposition the nation’s economy.

On October 17, Minister of Budget and Planning, Atiku Bagudu, while speaking to State House Correspondents at the end of the weekly Federal Executive Council (FEC) on the Federal Government’s outlook for the exchange rate and crude oil price, said that the council had established a reference price of $73.96 per barrel for crude oil and an exchange rate of N700/$ as key assumptions for budgetary planning in 2024.

According to an oil and gas expert, Engnr. Timothy Olapade, any drop in price below $75 will be injurious to the nation’s economy.

“We are running the current budget on $75 per barrel a day and is still gaining about $6 on each barrel despite the recent crash in the prices of crude oil.

“That means we are still making $2.4million on the 1.4 million barrels we produce per day.

“However, that is a far cry from the over $5million extra proceeds we were making daily when crude was $90, not to talk of when it was $97.

“I hope the falling trend will abate. If not, the country will soon face another revenue crisis, except it can quickly ramp up its current crude production”, Olapade stated.

However, it is not all news of doom for the country as the crash in the prices of crude oil, experts predicted, will result to a downward reduction in the pump price of petroleum products.

According to several estimates given to BH by oil marketers, a litre of PMS may likely sell for between N520 and N535 by the time refined products purchased in the last two weeks reached the shores of the country in December and January 2024.

The product is presently selling officially from N585 to N620 per litre in major filling stations across the country.

In stations owned by independent marketers, petrol sells for more, with Nigerians buying the product for as much as N700 in the eastern and northern parts of the country.

“I don’t know if you noticed it, crude oil is currently selling close to the rate it was when President Tinubu removed subsidy on petrol May, thereby pushing the price from N185 to N480.

“Pump price of petrol would have fallen to the post-inauguration rate of about N480 if not for the unification of exchange rate windows by the present government.

“However, if you factor in the new exchange rate, petrol should sell for between N520 and N530 at fuel stations when new shipments land in the country.

“The situation (crude oil price crash) is a double edge sword. While it will benefit motorists, passengers and fuel consumers on one hand, it could also lead to hardship as the government will not have enough revenue to pay workers salaries, not to talk of having funds to execute developmental projects”, declared Dr. Peju Beckley, a developmental economist.

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