NIGERIA’S beleaguered economy has received a minor boost from the inauguration of President Joe Biden after global oil prices rallied slightly to over $55 a barrel following his swearing-in yesterday.
Being a mono-economy with over 90% of government revenue coming from the sale of crude oil, Nigeria has been hit hard by the coronavirus pandemic, as it has led to a collapse in sales. this weak demand brought about by a reduction in industrial activity, has also impacted prices, making Nigeria extremely vulnerable.
Over recent months, oil prices have remained low despite a plan by the Organisation of Petroleum Exporting Countries (Opec) to reduce supply. Yesterday, however, the price of Brent Crude, the brand identical to Nigeria’s Bonny Light Crude rose to $56.52 a barrel amid elation that the new US administration will act big in the next Covid-19 relief package.
This was very close to the 11-month high and was sparked by comments by US treasury secretary nominee, Janet Yellen, that the US should act big in the upcoming stimulus package. Her comments to the US Senate finance committee also made the value of the dollar drop, which makes crude cheaper for holders of other currencies, while the overall bullish market sentiment also sent investors and speculators to riskier assets such as shares and commodities.
In general, the market was looking beyond the near-term oil demand scares, stoked by the continued lockdowns in many parts of Europe and now returning in parts of China too. Germany for instance has extended its lockdown until the middle of February.
However, market participants were looking beyond the first quarter, hopeful that a large stimulus package in the US would result in a rebound in the world’s biggest economy and relief packages in other economies would also help growth and by extension, oil demand, later this year. Although it cut oil demand forecasts for 2021, the International Energy Agency said in its Oil Market Report that much more oil is likely to be required, given its forecast for a substantial improvement in demand in the second half of the year.