Coronavirus pandemic has started impacting on Nigerian economy resulting in slump in a wide range of energy markets – including coal, gas and renewables – but its impact on oil markets is particularly severe.
The impact can be seen from the supply glut currently witnessed in the market and the persistent drop in crude oil prices which have rendered sale of Nigeria’s crude oil and gas to be sluggish.
The nation has confirmed that 50 cargoes of crude oil were yet to find landing without market and 12 cargoes of Liquefied Natural Gas (LNG) have yet to find buyers.
The unending spread of COVID-19 has stalled movement of people and goods as well impaired international trade, delving a heavy blow to demand for transport fuels.
According to the International Energy Agency’s latest forecast, global oil demand is expected to decline in 2020 as the impact of the new COVID-19 spreads around the world, constricting travel and broader economic activity.
Nigeria has cause to be concerned, as situation is impacting on its crude oil sale and also impacted on its 2020 US$38 billion budget which was predicated on US$57 per barrel of crude oil.
More than 90 per cent of Nigeria’s foreign exchange earnings and more than 60 per cent of the country’s earnings are from crude oil and gas.
Presently, with developments in the international oil and gas market, Nigeria’s major revenue-earner is currently under threat.
National Bureau of Statistics (NBS) reported the major buyers of Nigeria’s crude oil are India, Spain, Netherlands, France and South Africa; countries which are battling with cases of the coronavirus and the disease had impacted strongly on their economies.
The Group Managing Director of the Nigerian National Petroleum Corporation (NNPC), Mr Mele Kayri, confirmed the dire situation in finding buyers for the nation’s crude and gas.
He also warned of serious economic challenges as a result of the falling crude oil price and called on government at all levels, captains of industries and the organized private sectors to brace for the new low regime of global crude oil prices, while he added that realistic estimates must be made to reflect the current realities of the crude oil market
Kyari said that countries such as Saudi Arabia have started offering discount of US$8 and Iraq US$5 to attack customers, thus forcing a slide in price to below US$30 per barrel.
OPEC has failed in reaching output cut deal that would have stepped up price.
Mr Andrew Akpan, an Energy Expert, said that situation would cause a major strain on the country’s finances and its budget, especially as the country is relying heavily on crude oil sales to finance the 2020 budget.
Currently, the price of Nigeria’s Bonny Light has dropped to 33.73 dollars per barrel, 40.8 per cent below the 57 dollars per barrel budget benchmark.
Akpan said that the 57 dollars per barrel benchmark and 2.18 million barrels of crude oil per day output the government is targeting, as well as the oil revenue of US$8.5 billion would not be achieved.
“With the inability of the country to meet its revenue target, it would face serious constraints in its ability to pay workers’ salaries, as well as carry out most of the projects listed in the budget,’’ he said.
Mr Chinedu Onyeizu, a Petroleum Engineer, said situation would weigh heavily on foreign reserves and defending of Naira makes very difficult.
“With the decline in the value of the naira, price of goods and services in the country would rise sharply; inflation rate would skyrocket, unemployment would increase and poverty rate in the country would worsen,’’ he said
Finance minister Zainab Ahmed has reported that in order to find urgent solution to the problem, , President Muhammadu Buhari has formed a committee to access the impact of the virus on the economy and best practices to adopt.
“The mandate is to make a quick assessment of the impact of this Coronavirus on the economy, especially as it affects the crude oil price.
“We will be writing a report and brief Mr President on March 18, 2020 after that we’ll also have more substantial information for the nation.
“But it is very clear that we will have to revisit the crude oil benchmark price that we have of 57 dollars per barrel, we have to revisit it and lower the price.’’
MM/abj/APA