[1] Sometimes, help and relief comes from unexpected quarters
[2] In the case of Nigeria, the way out of our economic logjam may be the total collapse in global crude oil prices that will force us start thinking about economic development
[3] Over the last month or so, the price of Brent Crude, which is identical to and sells at the same price as Nigeria’s Bonny Light Crude oil has dropped to about $85 a barrel from an average of around $100 a barrel: http://www.nigerianwatch….com/…/5703-increased-shale-output-…
[4] This has been brought about by an increase in US shale production, reducing imports and the development is already causing some panic within the Organisation of Petroleum Exporting Countries (Opec). It will take a decision at its next meeting on November 27.
[5] US shale production is expected to top an amazing 10m barrels next year, which is going to depress global crude oil prices further
[6] Break-even oil prices for Saudi Arabia, based on budget requirements are at $89 a barrel but much higher for other producers like Nigeria at about $120 a barrel and the likes of Iraq, which requires $114 a barrel or Iran which needs to sell at $130 a barrel
[7] Basically, oil producers will need to do something drastic if prices drop further as they are currently selling below production costs. According to figures produced by Citigroup, Kuwait the break-even price is $44 a barrel, while it is $71 for Qatar but it is above $100 for most others like Venezuela where it is $161 and for Libya it is $185, while for Russia, who is not an Opec member, it is $105 a barrel
[8] With Canadian and US shale output set to rise next year, even if prices do not drop further, Nigeria simply need to recoup something like $15 a barrel x 5m barrels a day from elsewhere. If my figures are right, this is $75m a day, which adds up to $2.73bn a year
[9] There is no sign that Nigeria is really serious about economic diversification as the 2015 election appears to be about who controls the centre and thus oil wealth. I wrote a piece about the Northern Elders Forum over the weekend, who were adamants that it is their time to produce a president. Clearly, eliminating Boko Haram, bridging the education gap, getting GDP figures in the states to catch up with each other, etc is not among their concerns. They just want access to Nigeria’s oil revenue for their private bank accounts: http://www.nigerianwatch.com/…/5698-northern-elders-forum-s…
[10] Maybe depressed crude oil prices will eventually force our people to look elsewhere. I suspect it will make the presidency less attractive if there is no money to chop there. If I want to wish Nigeria the best, I should hope that US shale output forces crude oil prices down to $5 a barrel. Just imagine how it would force us to step up the diversification of our economy!
Credits: Ayo Akinfe | Facebook Profiles.