NIGERIA has received a brief respite from her debilitating economic crisis after global crude oil prices rallied again last week rising to as high as $59.34 a barrel on Friday amid signs that global demand may pick up again as the coronavirus pandemic starts to clear.
Following the global economic shutdown as a result of the spread of the Covid-19 virus, global demand for crude oil fell to an all time low last year, forcing prices down. Nigeria is particularly vulnerable as 95% of government revenue comes from petroleum product receipts and with almost no one purchasing crude at the moment, oil companies are having to scale back their operations in Nigeria.
Nigeria plans to fund about one third of its 2021 annual budget using loans as a result of the total collapse of the country’s oil economy brought about by the global pandemic. In 2020, Nigeria’s budget was predicated on oil selling for $57 a barrel bur prices dropped below zero at one stage, leading to fears that the government would end up with no revenue whatsoever.
However, with the unveiling of several coronavirus vaccines, some degree of optimism is returning to the market and there is hope that demand will pick up. These bullish sentiments have helped rally oil prices, rallying the price of Brent Crude, a brand identical to Nigeria’s Bonny Light Crude to almost $60 a barrel.
Between November 13, 2020 a now, the price of Bonny Light Crude has increased by 43% from $41.51 per barrel. This year, Nigeria is working on a N12.6trn ($32.4bn) annual budget, of which N4.28trn ($11bn) will be met by loans, mainly from global lenders like the World Bank and International Monetary Fund.