Nigeria could borrow more as crude oil price dips below $100/bbl – Rewane
As the price of crude oil dips below $100 a barrel, Nigeria may need to borrow to meet its financial obligation, while increasing the risk of debt distress as its debt service burden increases, Bismarck Rewane, Director (COO), Financial Derivatives Company (FDC) Limited, said.
On the other hand, the price of gas, Nigeria’s second export, increased during the period. Crude oil, which accounts for about 75% of Nigeria’s exports, is a major source of revenue for the country. A fall in the price of oil as well as a steady decline in oil production are expected to reduce government revenues.
In a recent FDC release, he said, the price of oil hit £100 in July as fears of a global recession, which could dampen demand, outweighed concerns about the tightening of supply. It fell to a low of 99.10bp on July 14 before rising to close the review period at 109.58bp on fears that OPEC+ is likely to increase supply further at its August 3 meeting. . On average, oil prices fell 10.33% to $104.93/bp in July from $117.01/bp in June.
National oil production fell 4.8% to 1.18 million barrels per day in July 2022, from 1.24 million barrels per day in June 2022.
The number of oil rigs in the country, on the other hand, remained constant for the fourth consecutive month at 11 in July. OPEC crude oil production increased by 220,000 barrels per day to an average of 28.90 million barrels per day in July, from 28.68 million barrels per day produced in June. Oil production increased mainly in Saudi Arabia, United Arab Emirates, Iran, Kuwait and Gabon, while it fell sharply in Libya, Angola and Venezuela.
OPEC+ agreed to increase oil production by 100,000 bpd in September, down from the agreed monthly increase of 643,000 bpd for July and August. However, fears of a possible slowdown in demand as the recession looms could keep the price of oil below £100 in the near term.
The continuing problem of oil theft and pipeline vandalism will continue to prevent Nigeria from meeting its OPEC quota, which is currently at 1.83mbd as at the last OPEC+ meeting in August.
The price of gas was relatively high in July as warm weather conditions in the United States and Europe exacerbated demand for cooling gas, while gas supply remained weak. Russia has continued to cut its gas supplies to European countries in retaliation for EU sanctions on its economy, and to European countries that do not pay for its supplies in the Russian currency known as rubles.