China’s economic slowdown means lower oil revenue for Nigeria

Last week Monday, China releases is third quarter GDP figures for 2015, which showed the weakest growth since early 2009, the low point after the global financial crisis.

China’s economic growth has slowed to 6.9 percent according to the figures, down from 7 percent in the first and second quarters. However, growth was faster than the 6.7 percent predicted by economists in aBloomberg poll.

“China’s slowdown means commodity prices worldwide are plunging, including oil” Analyst says.

The implication of this for oil and commodities dependent economy like Nigeria is that it will drive down their oil revenue more, even though China is not among the top ten oil importers from Nigeria but its weight in terms of demand for oil could drive down price in the market.

According to Analyst, China demanded huge amount of the total world crude oil, when its demand fall it will shake the market and thus, drive down the price.

According to BBC, China is the world’s biggest importer of crude oil. It took top spot in April this year and even before that was behind only the United State. Slower economic growth in China means less demand for oil than there would otherwise have been.

“Of course there are other factors behind the oil price collapse of the last year, some of them leading to abundant supplies. The rise of shale oil in the United States and Saudi Arabia’s unwillingness to respond by curbing its own output have also put pressure on the oil price,”  BBC noted

World Bank in its latest October commodity update revises its oil price forecast to $52 from $57 per barrel released earlier in July update.

The Bank stated that the revised forecast reflected a further slowing economic performance, high current oil inventories and expectations that Iranian oil exports would rise after the lifting of international sanctions.

The Banks attributed its decision to revise the oil price forecast to slower global growth particularly China and other emerging markets, abundant supplies and prospects of higher Iranian export next year.

With the Iranian oil coming on board and demand for oil shrinking, what all this means for oil dependent economy like Nigeria is that it will drive oil price down the more and this will affect government revenue from oil.

Since July 2014 till date, oil price has dropped by about 50 percent and this has really affected the Nigeria government coffer a lot.

Adebisi Nofiu