Ordinarily, one should say Nigeria stands to benefit from the rising price of crude oil in the international market, arising from the Russian hostilities in Ukraine. This is so much so because Nigeria is a nation highly dependent on its crude oil export.
But experts think otherwise, because the country equally imports almost all of its refined produce, including petrol.
Minister of state petroleum resources, Chief Timipri Silvia, set the balling during an interview with Bloomberg. He said the fact that Nigeria does not also produce so much oil also restricts the revenue potential from higher oil prices.
According to him “we are not currently happy with higher oil prices – that is a frank reflection of our oil economy now. The chicken has come home to roost.” He argued that what’s the point of having a $62 per barrel benchmark for the 2022 budget, when one is not inherently happy with $200 per barrel?”
An expert, Mr. Olumide Adesina said a $200pb oil price will jerk up the price of domestic gas. Adesina who is financial analyst with Quantum Economics said: “If global oil prices continued to rise at the same time as the naira fell in the IEFX window, the resultant increase in domestic gasoline prices would almost certainly occur.
“Moreover, we do not have a working refinery, so we must purchase petroleum products for domestic use. That reduces revenue potential. Yet, one thing is clear: The Nigerian economy cannot afford subventions in the energy sector.
“It is just a matter of time and how much more Nigerians will pay per litre of gasoline in the future,” he said.
Another analyst, Mr. Ken Anazor said the situation “simply means less revenue and more allocation to subsidy payments,” he said.
Truth is that the Nigerian economy has not benefitted from higher oil prices in recent months. There are months where the NNPC paid no revenue into the Federation Account.
“Prices at this level would have strengthened our fiscal positions, FX reserves, Excess Crude accounts, and Sovereign Wealth Fund, but what we will see is north of 300-400 billion naira payments for ‘subsidy,’” he argued.
It is evident that a $200 per barrel of oil is more of an inconvenience than a blessing to the Nigerian economy. Higher pump prices, higher government expenditure, inflation, and so on, are issues that come with a $200 per barrel oil.
Even developed nations like the U.S. will not benefit from higher oil prices as Bank of America’s Ethan Harris explained that the U.S. GDP growth could be cut by as much as 2% if the price of oil hits $200 per barrel.
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