Nigeria Reaps $113.88m Oil Windfall In US, Iran Face-off.
UMORU ABDULKADIR
Nigeria benefited, reaping a total of $113.88 million oil windfall in the four days of heightened tension between the United States and the Islamic Republic of Iran over the assassination of Iranian army general, Qasem Souleimani.
The windfall is expected to boost financing the 2020 budget and assist in additional infrastructural development as well improved the citizenry.
The U.S in a drone attack penultimate Friday killed Souleimani whom was accused of planning series of attack against US interests and personnel, raising tension in the fragile Middle East.
Prior to the friday incident, Oil prices had remained at $69.08 and hovering around the figure on Saturday through Sunday as Iran threatens to revenge the killing of its strongman
Oil Prices rose more than 1.5 per cent to $70.74 per barrel on Monday after Iran fired a series of rockets at two U.S.-Iraqi airbases, in protest of the assassination by the U.S.
The increase was the first time prices have risen to that level in more than six months, and further jumped to $71.34 per barrel the following day.
By implication, Nigeria, a major oil-producing country in the world and a member of Organisation of Petroleum Exporting Countries (OPEC) was in for windfall of $31.26 million daily, going by the nation’s 2020 budget projections of $57 per barrel oil benchmark at 2.18 million barrel per day (mbpd) approved for the year.
At $71.34 per barrel at the international market, the country makes $14.34 from each barrel of oil and that multiplied by 2.18 million barrels projected as daily production, amounts to $31.26 million per day.
Shortly after the drone airstrike by the US and while the Iranians mourn and protest Soleimani’s death, through Saturday and Sunday, the Oil price remained at $69.08 per barrel which it closed on Friday. On those two days, Nigeria made an excess of $12.08 per barrel and when multiplied by the 2.18 million (mbpd) projection in the budget, it would amount to $52.67 million dollars in two days.
On Monday, when the oil price rose to $70.74 per barrel, the country made a surplus of $13.74 from each barrel against the $57 oil benchmark. When multiplied by 2.18 million mbpd projection, it would amount to $29.95.
In total, the country made a total of $113.88 million in the four days the crisis lasted.
Brent, against which Nigeria’s oil is priced, has climbed more than five per cent since the US airstrike killed Soleimani in Iraq on Friday, January 3.
While oil prices had earlier jumped to an almost four-month high overnight, they fell back $65.78 during trading on Wednesday after the United States President, Donald Trump, in a televised address said no US or Iraqi lives were lost in the attacks and the bases suffered only minimal damage.
On Thursday, Brent crude price which was $67.05 per barrel on Thursday, January 2, 2020 before US assassination of Qassem Soleimani fell further after the crisis to remain above $65 a barrel, having tumbled 4.2 per cent the previous day as President Donald Trump downplayed the impact of missile attacks on American bases in Iraq, allaying concerns that Washington and Tehran were headed for military confrontation.
Oil slipped further towards $65 a barrel on Friday as tensions in the Middle East over Iran eased for now and investors focused on rising U.S. inventories and other signs of ample supply.
Meanwhile, had the crisis escalated further, and the oil price sustained at the level it rose to at the inception of the face-off, Nigeria would have been raking in $31.26 million per day, which would have gone a long way in financing her N10.594 trillion 2020 for which oil production projected at 2.18 million barrel per day (mbpd) at oil benchmark of $57 with an exchange rate of N305 per one United States Dollar.
As of Sunday, January 12, 2020, the Brent Crude oil price stood at $59.14 per barrel which is still about $2.14 higher than the $57 oil benchmark approved for the fiscal year.
Nigerians are unlikely to get immediate benefit or relief from the increase, considering the N2.3 trillion already projected as 2020 budget deficit. Similarly, another headwind to this, is the fact that any excess recorded would first be deposited into the nation’s Excess Crude Account (ECA), which is not immediately disbursed or utilized.
Furthermore, Nigeria being an import-dependent nation, especially of refined petroleum products (Petrol, Diesel, Kerosene etc.), part of the gains from the current oil price spike could be lost to subsidy payments through higher landing cost.
Premium Motor Spirit (PMS) subsidy which averaged N21 per litre in December 2019 has now risen to N38.50 as of Monday, just as the oil price surged to $70 per barrel for the first time since September 2019.
The figures further showed that PMS landing cost increased from N162.91 per litre in December to N164.13 on Monday just as the open market price for the commodity soared to N183.50 on Monday, compared to N182.28 in December. The latest increase shows N38.50 per litre difference which NNPC currently pays.
According to the PPPRA, daily NNPC under-recovery estimates (subsidy) stands at over N1.2 billion indicating that the country, on a daily basis Spend N1.2 billion on payment of petroleum product.
With the above factors summed up, it is very unlikely, that the country at large will feel the immediate impact of the increase even as an analyst are concerned about the implications of the development on the global market.
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