Recently, oil price surpassed US$70 per barrel due to the heightened threat to energy facilities in the Middle East. As the tension between the United States and Iran increases with the US threatening to attack Iran’s oil installations, there has been a significant rise in oil prices from US$64 to US$72 between December 2019 and January 20203. Given that Nigeria’s oil price benchmark for the 2020 budget is US$57 per barrel, there are likely to be significant gains into the Excess Crude Account in the first quarter. Although the government will benefit from the rise in oil prices in the form of increased oil revenue and foreign exchange reserves, the cost of petrol subsidy will also increase. In order to take advantage of the price increase, the government should ramp up local production and begin the process of fuel subsidy removal.
January 29, 2020
Nigeria Economic Update (Issue 02)
Related
Nigeria Economic Update (Issue 11)
Recently released report by the National Bureau of Statistics (NBS) indicates price increase of selected food items for the month of February 2017, relative to January 2017. Specifically, prices of the selected 24 food items ranged from N47.42 N1, 812 in January to N42.90 N1, 955.10 in February 2017. Average price of all selected items increased month-on-month by 2.7 percent to N540.05. Non-seasonal agriculture factors such as rising cost of crop production, imported products, and transportation continue to drive domestic food prices higher as domestic food supply contracts. This is also reflective of the high food inflation rate in February (18.53 percent) relative to 17.82 percent recorded in January 2017. Strengthening Nigerias crude oil production, supporting local agricultural production, and improving forex policies to straighten the naira remain critical in improving food supply and reducing inflation.
Nigeria Economic Update (Issue 28)
OPEC
weekly basket price increased marginally from $45.09 on June 17, 2016 to $45.95
on June 24, 2016, while Nigerias bonny light increased from $47.61
to $48.90 (with a peak of $49.2 on June 23, 2016)within the same
period. The rise in oil price, amidst downward pressures, was likely driven by
expectations that the UK would remain in the EU. However, price fell (to
$47.61) on June 24, 2016 following the outcome of the UK referendum (on June
23, 2016) to leave the EU. This was driven by concerns over a possible
contagion effect of further disintegration on the EU (a major oil consumer) which
could drive down oil demand in the longer term. In the medium term, oil prices could face
further pressure as a result of rising crude oil output and attenuating production
disruptions in Canada and Nigeria. Although, the recent rise in oil prices seem
transient, Nigeria can benefit from the marginal rise if disruptions in oil production
is quickly resolved