For the first time since December 2021, Brent crude oil futures have fallen below $70 per barrel, signaling a significant downturn driven by oversupply concerns, weak demand, and speculative selling. The global benchmark fell by 2.8%. U.S. West Texas Intermediate (WTI) crude also dropped, reaching $68.29 per barrel. While U.S. supply disruptions caused by Tropical Storm Francine offered some support, both benchmarks have been under pressure due to a weaker demand outlook.
Disappointing economic data from China and the U.S., the world’s top two oil consumers, has raised fears of an oil surplus. These concerns have been further intensified by increased production from non-OPEC countries.
Implications for Nigeria
The decline in oil prices is expected to add further strain on the Nigerian economy, especially on the naira, which has recently weakened to almost N1,600/$ despite interventions by the Central Bank of Nigeria (CBN). Last week, the CBN sold USD to Bureau De Change (BDCs) at a below-official rate of N1,584/$ to boost liquidity.
For the Nigerian government, this presents a new challenge. The 2024 budget assumes a benchmark crude oil price of $77 per barrel, but the recent drop has complicated efforts to meet financial targets. Additionally, Nigeria’s oil production has struggled to reach the 1.7 million barrels per day (bpd) set in the budget. Recent OPEC data indicates that Nigeria’s average production is currently at 1.352 million bpd, far below its target.
Lower crude prices could lead to a drop in petrol prices, offering some relief to Nigerians who have faced skyrocketing costs in recent months. Last week, the NNPC raised petrol prices from just over N600 per litre to N897. Meanwhile, a pricing dispute between authorities and the Dangote Refinery has further aggravated the cost-of-living crisis, leaving many Nigerians grappling with inflation and economic hardship.
