Rising Oil Prices and Nigeria’s Grim Economic Indices

Nigerians should ordinarily be rejoicing over the rising prices of crude oil in the international market.

But with the dynamics currently playing out, industry watchers believe that even at $100, getting a massively positive economic impact from the country’s most prized natural resource could be an uphill task. For instance, last week, oil prices, particularly Brent, Nigeria’s benchmark hit a two-month high amid projections that a lack of production capacity and limited investment in the sector could lift crude between $90 and $100 a barrel this year. It had also in the last quarter of 2021 hit the $85 mark.

On December 22, the National Assembly approved a N17.126 trillion budget for 2022, anchored on an oil price benchmark of $62 per barrel. While oil exports account for around 80 per cent of Nigeria’s foreign exchange revenue, however, the country has battled with a sharp drop in revenue amid a drop in production for months.Nigeria has not been able to get the full benefits of rising oil prices because a large portion of the the revenues it gets from there are used in paying for huge petrol subsidies. To be sure, this is not the fault of the ordinary Nigerian.

In May, June and July, NNPC recorded under-recoveries or value shortfalls of N126.298 billion, N164.337 billion and N103.286 billion, adding that the shortfall stood at N173.132 billion, N149.283 billion, N163.709 billion and N131.4 billion in August, September, October and November respectively. As it is, Nigeria does not define a drop of products, so it imports all it needs to power the economy, costing billions in dollars, thereby fleecing Nigeria of the much needed forex. Both the funding of subsidies and importation of products are largely opaque.

Despite rising Brent prices, the diminishing pace of Nigeria’s oil fortune is threatening the economic health of Africa’s biggest economy as the country’s oil rigs hit the lowest in six years. Despite its huge oil reserves, Nigeria has one of the lowest production per capita among oil-producing countries in the world, producing less than a barrel per 100 people.

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