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Concerns that the rising Sino-U.S. trade quarrel could slow the global economy and that U.S. sanction on OPEC members, Iran and Venezuela will further tighten the oil market presents Nigeria with mixed fortunes.
Slower global economic growth as a fallout from the trade dispute between China and the United States of America means less demand for oil, because oil demand is a function of economic activities. Less demand for oil implies oil prices will start falling, which is some bad news for Nigeria. But a tightened oil market will further shore up prices, good news for Nigeria’s economy managers.
Brent crude oil futures were at $71.12 per barrel at 0710 GMT, 12 cents, or 0.2 percent, below their last close. U.S. West Texas Intermediate (WTI) crude futures were at $62.30 per barrel, 5 cents above their last settlement.
Nigeria, Africa’s biggest crude producer is exposed either way to whatever happens at the international oil market because its economy is still heavily dependent on its petroleum sector. Oil still makes up 90 percent of foreign exchange and 80 percent of government revenue but contributes less than 10 percent of gross domestic product.
“It is time to take out fuel subsidies and put a proper stabilisation mechanism in place as buffer. Nigeria’s revenue this year is going to fluctuate, given these two major factors in the global oil market” said Oyindamola Adedokun, outcome lead, revenue stream at FOSTER, an Oxford Policy Management programme. “We are just barely out of a recession and if nothing is done to fix the petroleum sector, Venezuela may be our destination.”
Maritime consultancy and shipbuilding Tanker brokerage Eastport said in a note that “worsening trade friction between Washington and Beijing poses a downside risk to our forecasts” for petroleum products.
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