With the international oil benchmark, Brent crude, falling below the $30 per barrel mark on Monday, the oil-dependent Nigerian economy has come under more pressure from the sharp drop in government’s expected revenue. The coronavirus crisis has worsened, leading governments and businesses to shut down as the global economy appears to be headed towards certain recession.
Brent, against which Nigeria’s crude is priced, dipped by $4.01 to $29.84 per barrel as of 7.30pm Nigerian time on Monday, its lowest since January 2016. The 2020 budget, which was signed by the President, Major General Muhammadu Buhari (retd.), in December, was based on oil production of 2.18 million barrels per day with an oil price benchmark of $57 per barrel. The Federal Government was looking to generate N2.64tn oil revenue, representing 32.34 per cent of expected total revenue for this year, with non-oil revenue projection being N1.80tn.
The Group Managing Director of the Nigerian National Petroleum Corporation, Mallam Mele Kyari, said last week that the country was already struggling to find buyers for its crude oil, saying over 50 cargoes were yet to be sold. The unsold cargoes represented more than 70 per cent of the country’s total oil exports and puts the country on a very difficult spot, according to S&P Global Platts. Kyari said Nigeria’s crude cargoes had been stranded due to the higher selling price compared with its fellow OPEC members such as Saudi Arabia and Iraq, which could afford to offer discounts of around $5-$8 per barrel to buyers.
Saudi Arabia has reiterated its plans to boost production in response to a developing price war with its rival Russia after efforts to restrict supply failed earlier this month. Earlier this month, the Organisation of Petroleum Exporting Countries and its allies, led by Russia, failed to extend production cuts that began in January 2017, aimed at supporting prices and lowering stockpiles. An OPEC and non-OPEC technical meeting planned for Wednesday, the 18th of March, 2020 in Vienna has been called off as attempts to mediate between Saudi Arabia and Russia after the collapse of their supply cut pact made no progress, Reuters quoted sources as saying.