Crude oil continues on highs, sells above $85 per barrel

What should have been good news for Nigeria is set to be a fiscal headache as the international benchmark for oil prices surged above $85 per barrel on Wednesday.

Data obtained showed Brent crude sold for $85.04 a barrel the day before and the United States West Texas Intermediate (WTI) crude futures were up to $82.90.

Wednesday’s performance was a two-month high and there was a flurry of projections that oil price could hit $90 and $100 a barrel this year.

But the news of higher oil prices would not come as cheering news for Nigeria.

Ordinarily, an increase in oil price should mean more foreign exchange from the sale of crude, but production challenges mean not much gain is expected.

Since Nigeria imports its fuel for domestic consumption to keep pump prices in the country low the cost of subsidy on the other hand is set to increase.

In the eight 8 months of 2021, oil production in Nigeria averaged 1.52 million barrels per day compared to the budget of 1.86mpbd and the capacity of over 2mpbd.

This difficulty means Nigerian oil revenue was N754.2 billion, 43.7% or 586.52bn less than N1.34bn target in the 2021 budget.

Meanwhile data from the Nigerian National Petroleum Corporation showed that in 11 months of 2021, subsidy payment surged to N1.15 trillion.