Nigeria is seen improving revenues from its varieties of sweet crude, as oil prices book a rebound from record lows, stretching gains into the third consecutive week. This however will be of little significance to the CBN, analysts have said.
Crude Brent traded at $60.44 a barrel at the weekend, up 35 percent from $45 recorded in mid January.
Values for Nigerian crude have also increased as higher refining margins, supported by increased crack-spreads from its light varieties have boosted revenue for refiners.
Crack-spread is a term used in oil refining and trading, for the differential between the price of crude oil and the price of petroleum products derived from it.
“The main reason for the jump in prices for Nigerian varieties emanating from Agbami and Akpo fields was buoyant demand caused by widening naphtha crack spreads”, Platts a leading provider of energy and petrochemicals information said.
Nigeria’s flagship grade, Qua Iboe, traded at Dated Brent plus $1.30/barrel on Monday, the highest since November 20, 2014, compared to Dated Brent plus $0.50/barrel (gaining 80 cents) in December.
Light sweet Agbami, another Nigerian variety, which was pegged at Dated Brent minus $0.90/b in December, has also since strengthened to between Dated Brent minus $0.70/b and minus $0.40/b (gaining 50 cents) for the March programme, Platts data showed.
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Analysts are however concerned that this brief respite, which is seen coming to an end shortly, will not significantly aid the Central Bank in its fight to shore up the currency.
“The (slight rebound) will impact the CBN in the coming weeks, but not substantially”, says Esili Eigbe, Lagos-based head of West African research at Exotix Partners, a frontier markets investment bank.
“It does not make much of a difference, but it’s better than where Nigeria has come from a few months back,” he said.
World stock of oil rose about 265m, according to data from the Economist, and oil supply will increase by a further 1.6-1.8 million barrels a day (b/d) in the first six months of this year, to add roughly 300m barrels to the total oil stock.
“Although major producers have cut back on capital expenditure, the supply glut still largely exists”, Eigbe said.
“Nigeria will still be in a stressed position even if oil gets up to $70 a barrel. At slightly less than $100/b it was already under significant stress”, Eigbe continued.
“It will still need to make serious adjustments”.
Leakages, both in production output and revenue meant that Nigeria’s break-even point had to be placed above $100.
Adjustments will include sealing leakages, as well as addressing the budget, which at a benchmark of $65, has still not been revised.
A perceived lack of direction on the part of the CBN caused pressure on the currency by investors who want to pull out, and households trying to preserve their savings.
The CBN has however moved to end speculative attacks on the currency, arising from the arbitrage opportunities caused by multiple exchange rates.
Naira weakened further by 0.5 percent, trading at N200.10 to the dollar as at the close of Friday’s business.
Yields on 10-year bonds fell 0.10 percent.
Edozie Ifebi, Josephine Okojie & Daniel Ojabo
