( 3 minutes read)
· The Nigerian economy could have been on a solid growth path thanks to the uptick of the oil prices. But the strange profile of its exports and imports impact its bottom lines even while the oil prices pick up
· While exporting crude to different countries for refining, the West African country is one of the largest importers of the refined oil as fuel and bye products of petroleum at higher price than it exported the crude oil
· Experts opine what that holds good for Nigeria is no longer simple choice between bullish or bearish oil prices
The Nigerian economy could have been on a solid growth path thanks to the uptick of the oil prices. But the strange profile of its exports and imports impact its bottom lines even while the oil prices pick up.
While exporting crude to different countries for refining, the West African country is one of the largest importers of the refined oil as fuel and bye products of petroleum at higher price than it exported the crude oil. Nigeria’s refineries are operating at a near-zero capacity. Therefore, the country has to import an estimated N52 million liters. Rising oil prices mean more pressure on the country’s foreign exchange, despite earning 90 per cent of its foreign exchange from exporting crude.
Experts opine that what holds good for Nigeria is no longer a simple choice between bullish or bearish oil prices. Only the right mix of prices are suitable for Nigeria’s peculiar challenge characterized by 90% exports of crude and import of huge quantities of refined oil..
A liter of refined oil is currently subsidized by the sole importer – the Nigerian National Petroleum Corporation (NNPC) –by 10% to sell at N163 as against N184 landed cost. A reduction if not elimination of insubsidy would mean larger quantu m of resources, which can be targeted for development works. Otherwise, rising crude prices can only mean more woes. The growing trade deficit is a drain on the foreign reserve. The reserve has declined from US $35.2 billion to US$34.7 billion as of May 5, 2020.
