Nigeria’s oil export to dwindle as Britain, others impose lockdown

With some European countries tightening restrictions overconcerns of another wave of coronavirus cases, Nigeria may be heading foranother financial meltdown as the majority of Nigerian oil buyers are inEurope, and with imminent lockdown, the country could face a potential scenariowhere oil revenue would decline.

The Blueprint reported that Europe has been Nigeria’s main crude oil export regionwith countries there importing more than 800,000 b/d of crude oil andcondensate from Nigeria, accounting for 41 per cent of the country’s export.

But with the recent resurgence of the coronavirus, someof the leading economies in the region, including Germany, Britain, France,Austria, Spain, Italy and many others have imposed restrictions on movement,invariably cutting down on petroleum imports.

Oil prices, which dropped over 10% last week, got areprieve this week after OPEC member Algeria came out in support of deferring aplanned increase in OPEC oil output from January and Russia’s energy minister raisedthe possibility with the country’s oil companies to avoid another collapse inprices.

Oil prices rose over 2 per cent earlier in the week,advancing with other financial markets on U.S. Election Day although traders werebracing for volatility as Brent futures rose 84 cents, or 2.2 per cent, to$39.81 a barrel, while U.S. West Texas Intermediate (WTI) crude settled 85cents, or 2.3 per cent, higher at $37.66 per barrel.

But it’s still below Nigeria’s benchmark price in the2021 budget presented by President Muhammadu Buhari to the National Assembly,month’s bank.

Managing Director/Chief Executive Officer, FinancialDerivatives Company Limited, Mr. Bismarck Rewane, faulted the benchmark oilprice, saying based on current crude oil price, a $40 barrel per day projectionwas too optimistic.

According to Rewane, “normally, you would allow at least20 per cent headroom between the spot price and your benchmark price.
If youare to take 20 per cent headroom, which means the oil benchmark should be about$32 per barrel.

Also reacting, the Head of Vitol Group in Asia, MikeMuller, said:  “We are seeing demanddestruction unexpectedly from these lockdown measures – hundreds of thousandsof barrels-per-day-equivalent for Europe alone,” he said.

“But the bigger,overriding picture is still that the world is in a stock-drawing mode.”