Nigeria’s economic forecast has taken a promising turn as Brent crude oil prices surged to $86 per barrel, marking an increase from previous levels.
This uptick in oil prices, caused by Ukraine’s increased attacks on Russian energy infrastructure, has injected optimism into the nation’s economic landscape, offering hope amidst recent challenges.
At the time of drafting this report, the May delivery of Brent crude oil futures experienced a notable uptick, climbing by 40 basis points to reach $85.66 per barrel.
Meanwhile, the April contract for US West Texas Intermediate showed a similar positive trend, registering a 0.5 percent increase to stand at $85.74 per barrel in trading activities.
This surge can be attributed to various factors, including geopolitical tensions, supply constraints, and increasing global demand as economies recover from the pandemic-induced slowdown.
In the 2024 budget, the Nigerian government has established a benchmark production target of 1.78 million barrels of oil per day, aiming to meet revenue projections.
Also, the FG set the benchmark price of crude oil in the budget at $77.96, indicating its expectation for the global oil market’s performance.
Analysts and economists have welcomed the positive development, highlighting its potential to stimulate investment, job creation, and overall economic expansion.
However, they also emphasise the importance of prudent fiscal management and diversification efforts to ensure sustainable growth and resilience against future volatility in oil markets.
“This translates to more forex for us as 70 percent of our FX revenue is coming from the sale of crude oil. But again, it depends on what our production level is,” said Temitayo Lawal, an energy consultant.
He said that Nigeria must fight local challenges of vandalisation of oil pipelines, oil theft, and host community disputes. “And recently there has been a wave of divestment from the IOCs and capacity gap that could also affect the technical capability to optimise oil wells to meet essential production.”
“So, it’s good news that Brent price has gone up but we should be cautiously optimistic in terms of how we will rejoice on how it will translate to FX revenue. So it will translate to FX revenue subject to the government fixing the issues in the sector.
“Providing the security for the operation of oil and gas operators. And also safeguarding the seas from oil theft. So that’s just what my view looks like,” Lawal added.
The Nigerian economy, heavily reliant on oil exports, has been grappling with various hurdles recently, including oil theft, security concerns, and oil major divestments.
Mele Kyari, group chief executive officer of the Nigerian National Petroleum Company Limited (NNPCL) has announced the company’s effort in tackling cases of oil theft in the country, stating that 6,409 illegal refineries had been deactivated in the Niger Delta region of the country.
“We have deactivated 6,409 illegal refineries in the Niger Delta region. Today, we have disconnected up to 4,846 illegal pipes connected to our pipelines, that is out of 5,543 such illegal connection points. That means there are a vast number of such connections that we have not removed.”
According to him, going by the volume of oil stolen daily and the brazenness with which the perpetrators operate, crude oil theft is the most humongous and virulent economic crime in Nigeria that must attract the attention of anti-graft agencies.
