Nigeria’s economy may face a shock as oil prices continue to rise, now trading at above $111, the highest since 2011.
Although receipts from crude sell would jump, it also means increased subsidy bill, as the Federal government would have to cushion the international market price of imported petroleum products.
At the moment, it is looking unlikely that the Federal government might continue to sustain the N165 pump price for petrol, which would worsen the current scarcity of petrol in parts of the country.
Available data on Wednesday showed that brent crude, the benchmark of Nigeria’s oil, was selling at 111.46 per barrel.
And the US West Texas Intermediate (WTI) crude was at $110.19 per barrel.
The astronomical rise in the oil price is driven by the growing concern of supply disruption which reached fever pitch in Europe, occasioned by the conflict between Russia and Ukraine.
With sanctions flying around Russia, European countries are not really concerned that one of the world’s oil giants will turn off its tap.
The rise in oil price could mean the fuel scarcity won’t go away anytime soon.
The Nigerian National Petroleum Corporation (NNPC) relies heavily on imports to meet the daily demands of over 60 million litres in the country.
The current international oil price means it will cost almost double the amount to import petrol, compared to the same period last year.
According to the most recent data from the Nigerian Midstream & Downstream Petroleum Regulatory Authority (NMDPRA) Nigeria had in its stocks as at November 29, 2021, 2.12 billion litres of PMS that could last more than 37.
While the data is yet to be updated, 37 days from November 29, 2021, ended on January 6, 2022.
That explains why the NNPC was unable to remit money into the Federation account in January, after picking the huge subsidy bill from its importation of petrol into the country at an average $90 per barrel for the month.
With oil now above $111, experts fear that hard times await the Nigerian economy.