Hope for Nigeria’s economy as oil price hits $57

Crude oil prices have continued to rise, hitting $57 a barrel on Tuesday, the highest level in nearly 12 months.

The development has given a renewed hope for improvement in the Nigeria’s economy, largely depended on oil revenue.

During early Tuesday trading, Brent crude, the international oil benchmark, was up $1.36 at $57.71 a barrel — its third consecutive day of gains. West Texas Intermediate (WTI) gained $1.43, at $54.98.

Nigeria, Africa’s largest economy, depends on earnings from oil to finance its N13.588 trillion 2021 budget.

The budget has a benchmark oil price of $40 per barrel; daily oil production estimate of 1.86 million barrels (inclusive of condensates of 300,000 to 400,000 barrels per day); exchange rate of N379 per US Dollar; GDP growth projected at three per cent; and inflation closing at 11.95 per cent.

Experts have predicted a steady increase in prices of crude oil globally this year, despite partial economic lockdowns in many places in response to the impact of the coronavirus pandemic.

They note that as implementation of the vaccines increases the pool of the virus-immune population, business activity will resume creating demand for refined petroleum products.

This upward trend in crude has been largely boosted by the gradual decline in US shale production and inventories.

The move in early January by OPEC+ to restrain output into mid-2021, and an extra “gift” from Saudi Arabia to remove another one-million BOPD from the market, have reportedly provided the impetus for the WTI to rise firmly into the $50s.

Oil price has been on a tear since late last year as coronavirus vaccines and supply curbs from OPEC and its allies spur hopes that global stockpiles will continue to slide.

It, however, still faces bumpy short-term demand amid concern that new virus variants will lead to more lockdowns, while vaccine rollouts are slower than expected in some countries.

Still, with cold weather sweeping across the United States and much of Wall Street anticipating inventory draws in the coming months, prices continue to surge higher.

Saudi Arabia, the world’s biggest oil exporter, had at a meeting last month agreed to cut oil production for the months of February and March by an extra voluntary amount of one million barrels per day.

This means that the kingdom’s production for the two months after both its targeted and voluntary production cuts will be 8.119 million per day.

Nigerian National Petroleum Corporation (NNPC) has stated its commitment to the output cut agreement of the OPEC+ to stabilise the global oil market.