Danger looms for Nigeria as Oil prices plummets to below $30/barrel

oil prices drops

The price of oil fluctuates around $30 to $32.50 dollars following the overproduction of the energy source by Saudi Arabia. This is the lowest level the commodity have come since Feb 22, 2016.

On Saturday, Saudi Arabia announced massive discounts to its official selling prices for April, and the nation is reportedly preparing to increase its production above the 10 million barrel per day mark, according to a Reuters report. The kingdom currently pumps 9.7 million barrels per day, but has the capacity to ramp up to 12.5 million barrels per day. Russia rejected an agreement with OPEC on cuts in oil supplies to bolster prices.As a result, oil prices dropped sharply thereby endangering all economies depending on the commodity.

Nigeria’s economy will definitely take a direct hit from the plummeting oil prices. Currently, Nigeria is producing a little over 2.5 Billion barrels/day and with the country’s budget this year at 10.33 trillion Naira. The budget pegged oil price at $57/barrel. With this value, Nigeria is expected to earn daily $142.5B/day. However, the country still imports all the refined products.

With the exorbitant cost of governance in Nigeria, the country needs to borrow further or to tax the masses to support the revenue generation streams for the government. In another speculation, it is obvious the CBN might allow for free fall of the Naira against the dollar. Currently, the exchange rate is 360/$ which is no longer sustainable.