- Oil is racing towards $90 a barrel and it is currently trading at the highest level since the administration of Goodluck Jonathan
- Before the end of 2021, there was a flurry of projections that oil prices could hit $90 and $100 a barrel
- With reported disruption in the Middle East including a key pipeline running from Iraq to Turkey it is looking increasingly possible oil will hit $90 in days
What should have been good news for Nigeria is set to be a financial headache as the international benchmark for oil prices surged closer to $90 per barrel.
According to Bloomberg, on the morning of Wednesday, 18 January 2021, crude price traded was sold at $88.69.
Wednesday's price represents an eight-day consecutive rise as demand continues to outweigh supply.
However, unlike during the Goodluck Jonathan's administration, the current surge in oil prices is not a welcome one.
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Normally, an increase in the price of oil should result in more dollars but production constraints mean that no significant gain is expected.
This is because, Nigeria imports the majority of its petrol consumed, and is largely affected by changes in international oil prices.
To keep pump prices low (N165), the rise in oil prices will come with an extra burden.
The Group Managing Director of the Nigerian National Petroleum Corporation (NNPC), Mele Kyari has always put the comfort zone for oil price at $58-$60, saying that anything above $70-$80 will add more difficulties.
Nigeria's oil revenue performance
In the first eight months of 2021, Nigeria's oil output averaged 1.52 million barrels per day, compared to a budget of 1.86 million barrels per day and a capability of more than 2 million barrels per day.
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Because of these difficulties, Nigerian oil revenue was N754.2 billion, or 43.7 percent or N586.52 billion less than the N1.34 billion forecast in the 2021 budget.
Meanwhile, figures from the Nigerian National Petroleum Corporation indicated that subsidy payments increased to N1.15 trillion in the first 11 months of 2021.
Nigeria has only $60 million left in its excess crude account
Meanwhile, It is almost game over for Nigeria and one big withdrawal from the excess crude account could see it drop to an unredeemable state.
According to reports, Nigeria excess crude account has dropped significantly to just over $72 million.
Even with oil trading above the expected price, Nigeria cannot save its oil revenue for which the ECA is created.