Nigeria faces economic ruin as global crude oil price drops to just above $22 a barrel

NIGERIA'S economy is facing a severe crisis due to the disruption the spread of the dreaded coronavirus is causing after the global price of crude oil collapsed to just over $22 a barrel this morning.

As a result of the spread of the virus, Chinese output has been severely affected, which in turn has had a domino effect on global industrial production. With supply far outstripping demand, this has led to a collapse in crude oil prices, with Brent Crude, a grade identical to Nigeria's Light Bonny Crude in free fall over recent weeks and this morning it is only selling for 22.46 per barrel.

This is the lowest global crude oil prices have been in over four years and is exacerbated by a price war between Russia and Saudi Arabia. Nigeria is particularly vulnerable to the volatility of the global crude oil market as petroleum accounts for about 95% of government earnings and the 2020 budget is predicated on the nation selling 2.18m barrels of oil a day at a price of $57.

Nigeria's federal government needs to generate N2.64tn from oil revenue, representing 32.34% of expected total revenue for this year, with the non-oil revenue projection being N1.80tn. However, Mallam Mele Kyari, the managing director of the Nigerian National Petroleum Corporation, has warned that the country is already struggling to find buyers for its crude oil, saying over 50 cargoes were yet to be sold.

With Nigerian crude oil more expensive than that of other suppliers such as Saudi Arabia and Iraq, barrels of crude oil are stockpiling at the nation's export terminals. With Nigeria now below target both in terms of quantity sold and price, the economy is facing a severe threat, with government expenditure faced with the prospect of halving.