Bloomberg has predicted that Nigeria may face a new fiscal challenge following the European Union (EU) proposal to completely ban Russian crude oil.
Orient Energy Review magazine reported yesterday that the EU has finally proposed a full ban on Russian crude oil as part of sanctions for its continued attack on Ukraine.
Speaking on the proposed full ban on Russian oil at the European Parliament, the European Commission (EC) President, Ursula von der Leyen, said that the sixth package of sanctions against Russia over its invasion of Ukraine, would come into force within the end of 2022, to give EU member states time to phase out purchases.
The EC President however pointed out that it will not be easy as some EU member states are heavily dependent on Russian oil.
“Let us be clear: it will not be easy. Some member states are strongly dependent on Russian oil. But we simply have to work on it. We now propose a ban on Russian oil. This will be a complete import ban on all Russian oil, seaborne and pipeline, crude and refined.”
But von der Leyen said the EU will make sure that it phases out Russian oil in an orderly fashion, in a way that allows them and their partners to secure alternative supply routes and minimize the impact on global markets.
“This is why we will phase out the Russian supply of crude oil within six months and refined products by the end of the year.”
The proposed ban has led to a leap on crude oil prices by over four percent to about $108 per barrel, Bloomberg reported. This means that Nigeria would import petroleum products at higher cost, and this means an automatic increase in the country’s subsidy spending.
According to Bloomberg, leading buyers of Nigerian crude, especially India and China, may sideline Nigerian crude for possible much discounted Russian oil.
Meanwhile, the report noted that as the EU considers a ban on Russian oil, India, which is the world’s third-largest oil importer and Nigeria’s largest crude buyer is negotiating discounts for the Russian oil where it is asking for less than $70 per barrel price to compensate for logistics, financing and sanctions troubles.
The Bloomberg report further stated that if India and Russia agree on the discount, state-owned refiners in India could import as much as 15 million barrels of Russian oil in May.
Similarly, Nigeria would feel the same impact if China, who bought about $1.02 billion worth of crude oil from Nigeria in 2020, according to the United Nations trade database on international trade, decided to follow the plan of India.
Stakeholders believed that the development may eventually become blessings in disguise to Nigeria, which is already moving to partner with EU investors to invest on gas infrastructure development in the country, the immediate implication has been projected to escalate the rising inflation due to the high cost of petroleum products, especially as Nigeria mainly imports the product.
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