Just as Nigeria’s crude oil production output starts rising, global crude prices are moving down again, threatening Nigeria’s Forex reserves.
As monitored during close of trading sessions yesterday, the Pound Sterling fell to its lowest level for 30 years, the FTSE 100 initially shed GBC120bn and the oil price crashed by more than 5% International benchmark Brent crude was down 5.4 per cent at a little above USD48.4 barrel at around 11.30am in London trading today.
Apart from the effect of a Brexit hangover tumbling prices of global stocks in many markets where linked to the pre-Brexit European Union economy, the increasing daily output from Nigeria was expected further reduce the price of crude.
The Nigerian government has been pulling diplomatic, local and military strings to converse with militants who destroyed major oil installations across various fields in Nigeria’s oil rich Niger Delta.
However, the deadly inferno in Canada’s oil region added to the one month surge in global crude prices. Eventual resolutions to these variables are expected to take prices back to the region of USD48 to USD37 per barrel.
A major decider of crude price going forward is Brexit and Nigeria’s ability to reach concrete resolution with militant groups in the Delta creeks. Nigeria’s economy is already suffering from one of the worst fall in government revenue. Forex shortages have skyrocketed prices of goods and services sending inflation to 15%.
The Naira (NGN) has fallen by over 20% since the Nigerian Central Bank started a single market policy for the currency to float. Since prices are now determined by market forces, the Naira has been has traded between 281 to 282 Naira to USD1. Meanwhile the kick starting of a futures market at the FMDQ OTC Exchange might reduce pent up demand for the Dollar bringing about a demand and supply equilibrium in the best possible time.
Nigeria still has to increase exports and reduce imports that deplete its Forex reserves.
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