Global Crude Oil Prices Vs The Nigerian Market.
By Olugbenga Ajiboye.
Nigeria has had its fair share of difficulties in 2014, to talk about it would be to point out the obvious. However, external issues are now leaning on the Nigerian economy. Today Int'l crude oil prices hovered around $88per barrel, from its normal high of $104. The decline was not an immediate fall, but has been steady since June 2014.
The media lists the resons for this decline as follows,
Increase in Global Crude Oil Supply especially by the United States, now producing 8.5million barrels of crude oil per day, almost 4 times as much as Nigeria's recently recorded production by the National Bureau of Statistics (2.2million barrels/day).
Increase in Libya's production of crude oil, which was previously low in the range of 240,000 barrels perday, as a result of the political instability, but is now 800,000 barrels/day.
Less than anticipated growth in China, which is one of the major buyers of int'l crude oil, has also led to a stockpile in the inventory of global crude oil markets.
This week, Saudi Arabia annouced a drop in the price of their crude oil exports by $1, a move that many interprete as increasing pressures on the Saudis and OPEC nations.
What does this mean for our Economy?
Well, it means less revenue obviously. However, the implemented 2014 budget benchmarked oil prices at $74 per barrel, so the effect would be slightly cushioned as we were prepared.
What we were not prepared for was a decline in production, where the budget stipulated a production of 2.3million barrels/day and is now producing below its benchmark.
This effect is already showing up in our currency markets, as the CBN has been making efforts to prop up the value of the naira against the dollar, by selling dollars to lenders according to Channels News.
Effects on the loss of foreign value (depreciation) of our currency holds sway over investors in our Capital markets, as the values of Nigerian stocks will be dip showing a decrease in the Nigerian Stock Market Index.
Global Oil prices are unlikely to revert anytime soon, in the meantime I'd say, Keep Calm and remember to always read The Savvy Nigerian. :)
UPDATE: The NSE closed at a netloss yesterday experiencing an index fall of 0.07 a total market value of abt NGN 10billion.
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