KEY POINTS
- Brent crude oil dip below $70 per barrel for the first time since 2021
- Economic slowdown in China and the U.S. fuels demand concerns
- Nigeria faces budget challenges amid declining oil revenues
Brent crude oil has experienced a reduction in price for the first time in 3 years. The crude oil is below $70 per barrel at the moment. This rare event reveals what is currently happening in the global oil market. The decline in prices was due to oversupply, low demand and risky selling. The crude oil fell by 2.8%, while the U.S. West Texas Intermediate (WTI) crude also dropped by 0.6%, making one barrel of it $68.28.
Many of the world’s largest consumers of oil such as China and the United States have been in recession. Due to their low demand, there is currently an excess supply in the oil market making oil-supplying nations greatly concerned.
Impact on Nigeria’s Economy and Currency
Nigeria is not spared. The fall in oil prices has put much pressure on Nigeria’s currency, the Naira. This can lead to a high inflation rate and a harder time for Nigerians. The naira has plunged to as low as N1600 per dollar. The Central Bank of Nigeria has attempted all it could to regulate the currency, but nothing has worked so far.
The CBN even went as far as selling USD to Bureau De Change (BDC) operators at ridiculously cheap rates, in a bid to provide liquidity, but the naira continues to fall.
According to a report by Sun News, the decline in oil prices has also affected Nigeria’s budget planning. While developing the budget, the government assumed oil prices at $77 per barrel, unfortunately, things are not the same as before any longer. Moreover, the crude oil production in the country remains lower than the OPEC set goals which are at 1. 5 million barrel-per-day.
Potential for Lower Petrol Prices
The drop in crude oil prices can offer some benefits for Nigerians. Lower global crude prices could make petrol cheaper than they used to be. This can offer relief to people especially those who are struggling to make ends meet due to the increasing cost of living. Just last week, petrol prices in Nigeria became N897 per litre, so a consistent decrease in crude oil prices may lead to cheaper prices.
