Energy

Current crude oil price drop to worsen Nigeria’s economic situation

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By John Meze

The current crude oil prices in the international market may have reached the close to call level with the product’s benchmark in Nigeria.

Trading at $49.65 per barrel this week, a sudden drop from the $52.40 per barrel last week has been described as a close call to the benchmark of $42.05 per barrel set by the National Assembly as the fail safe situation for the trade which yields about 85 percent of the country’s gross domestic earnings.

The drop by $3.72 in price is seen by industry experts as a big threat to the country’s trade in the product, since it has been witnessing a continued slide from its total production output of 2.8 million barrels per day to about 1.269 barrels per day.

Though there has been claims and counter claims of the actual position of the country’s output to the international market, industry watchers, however, shared the belief  that whatever the output situation may be, the continued slide of the price of the product may not be to the advantage of the nation. They argued that with the current price tag the, nation which produces about 1. 269 barrels of crude oil would be barely able to rake-in about $62,967,780 per day from a trade it was making about $99, 560,000 last week, which was even considered inadequate and a far cry from what the nation had expected with the lowering of the benchmark.

They further posited that with the current economic situation in the country which more or less calls for drastic measures with immediate solutions that all development efforts of the country may be stunted given its dependence on crude oil for its major foreign trade earnings.

 Nigeria was the number one crude oil producer in Africa but has lost this position to Angola which has for over 10 years threatened the Nigeria’s position as the number one through its continued increased output.

Angola’s crude oil production increased to 1.652 million barrels per day in March from 1.649 million barrels per day in February of 2017 and crude oil production in the country averaged 1.268.08 million barrels per day as from 1994 until 2017, reaching an all time high of 2.030 million barrels per day  in March of 2010 and a record low of 503 million barrels per day  in March of 1994.

Crude oil production in Nigeria decreased to 1.269 million barrels per day in March from 1.426 million barrels per day in February of 2017 and the country’s averaged crude oil production was 1.894.51 million barrels per day as from 1973 until 2017, reaching an all time high of 2475 million barrels per day in November of 2005 and a record low of 675 million barrels per day in February of 1983.

According to experts, exports of multiple Nigerian crude oil grades, including Bonny Light, Forcados, Brass River, and Qua Iboe, which  have been under periods of force majeure since the beginning of 2016, meaning companies are released from export obligations as a result of circumstances beyond their control.

Significant disruptions in oil production resulting from Niger Delta  Militant  attacks, combined with relatively low crude oil prices, to have had a significant effect on Nigeria’s economy.

Be that as it may, several factors are attributable to the current situation of the country’s low level crude oil production.

The recession, in the economy is, however, seen to be the Achilles heels of the industry, since many companies operating in the nation is caught up with the awful situation which has weakened the Naira against other major currencies in the world.

Aside from affecting business lives in the country the nose diving of the Naira as well as it vacillating nature, it was advanced may put paid to the speedy growth of the industry since, the volume of the local currency required for foreign exchanges may not be available.

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