The negative impact of the oil price crash on the Nigerian economy on account of the global coronavirus crisis, is alarming, according to the Group Managing Director (GMD) of the Nigerian National Petroleum Corporation, NNPC, Mr. Mele Kyari.
Kyari said coronavirus is distressing the global economy particularly as it affects oil demand and price suggesting Nigerians and the country are in for a hard time.
The NNPC boss raised the alarm at the Consultative Roundtable on the economy organised by the Central Bank of Nigeria, CBN, in Abuja, on Wednesday.
The federal government pre-coronavirus in its 2020 budget had set the benchmark price of oil at $57 per barrel but following the prices have fallen to about $32 per barrel as a result of the pandemic disease.
In the midst of the worrying situation, the demand for crude oil has fallen to the point that 50 cargoes of Nigeria’s crude had not found buyers.
Kyari’s word: “For the oil market, all of us here are aware of what happened – the Black Monday. It also signifies the importance of oil in the global economy.
‘’Oil affects everything. When the oil market collapses, everything collapses. And oil market collapses in two ways: one is low prices and the other is 2008 -2010 when the global crisis was caused by very high oil prices.
“Right now, we are getting oil from the least expected places. We have plans, we can take our production to three million bpd but we must produce at low prices.
“Today, I can share with you that there are 12 LNG cargoes globally, it has never happened. LNG cargoes that are stranded have no call because there is absolute collapse in demand, associated with coronavirus.
“It is also affecting the liquid crude. As at today, for Nigerian crude, we have about 50 cargoes that have not found landing. It means the traders have bought them but they don’t know where to take them to. And this is true of other jurisdictions.
“As at yesterday, Iran dropped its price by $5 (per barrel); Saudi Arabia dropped price by $8 (per barrel.), so when you have oil price at $30 and you drop it by $8, it means that you are selling it at $22 and that is a huge problem.
“In Saudi Arabia, their average production cost is about $4 or $5 pbl. Today, the best of our production is about $17 pbl. Today, there are countries which cost of production is categorized at $30 pbl and we are one of them. If the oil price is $30 or $32 pbl and you are producing at the cost of $30, you are out of business.
“Therefore, depending on the potential of coming out of the impact of this coronavirus for a long time to come, at least three months, so prepare for trouble for at least three months, even if prices come back today, you have a backlog of production cost.”
