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Good & bad news for Nigeria as Crude Oil sells above $80

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September, 28 2021

The gap between the price of oil predicted in the Federal Government’s 2021 budget and the current market price is a massive 100 percent. The federal government has, therefore, started to update the 2021 fiscal blueprint with the expectation that the oil price will be projected to go down to $40 per barrel.

The international crude benchmark, which is used to price Nigeria’s oil, closed at $80.25 per barrel on Monday. The rate was $81.02 per barrel on Friday and $78.03 per barrel on Thursday. The closing rate represents a sixth consecutive rise and the ninth such rise in the last ten days.

The price of oil has hit above $80. The first time it has achieved this level was in October 2018. The price of oil has been on a tear for some time now, and oil’s latest upswing has come with a flurry of bullish price predictions from banks and traders, further gains, and speculation that the energy industry isn’t investing enough in fossil fuels to keep supplies at current levels.

Oil and Gas Trends Magazine has predicted that the price of Nigerian crude oil would continue to rise in the coming months amidst rising demand and dwindling supply across the globe.

The rapid increase in the price of crude oil since the beginning of the year has not gone unnoticed by market analysts. Goldman Sachs predicted that oil would hit $80 per barrel during the fourth quarter of 2021, while the Bank of America predicted that oil would touch $100 per barrel over the next six months.

for Nigeria.

As the most important driver of energy markets, a colder-than-usual winter could tip the scales towards a significant rise in global energy prices over the coming months. If a stronger USD continues to hamper OPEC’s ability to cut production, oil prices could stage a short-term rally.

The Trafigura Group, one of the world’s largest commodity trading houses, says oil prices could reach $80 a barrel by the end of the year. The company has also forecasted higher oil prices.

The high oil prices are good news for Nigeria’s economy, but bad news for its foreign exchange reserves.

Nigeria’s oil production is still under pressure with pipeline vandalism and oil theft which has affected the industry. The current situation is a double-edged sword. Crude oil is always a positive for any economy, but under this condition, Nigeria will have to spend more first on importing and also paying fuel subsidies to keep it low.

The fact that over N905 billion has been lost by the federal government in 2021 on subsidy shows that this issue goes beyond Nigeria’s economic strength. It also suggests that the Nigerian economy is in its deepest doldrums.

As the rising price of oil hits the $80 mark, the cost of keeping fuel low in the country is becoming more and more unaffordable. The sum of N2 trillion has been estimated as Nigeria’s total forex gross sales for this year.

According to the managing director of the Nigerian National Petroleum Corporation (NNPC), Mele Kyari, rising crude oil prices will cause problems for resource-dependent countries such as Nigeria.

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