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Nigeria’s economic crunch may persist as World Bank projects oil price drop over next two years

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According to the World Bank‘s recent commodity markets outlook report that was released on October 26, oil prices are expected to experience a decline from now till 2024. According to the report, Brent crude which is the standard oil price may decline from $120 per barrel in June to $90 per barrel in September. The World Bank outlook also projects that the price of Brent crude oil may average $92 per barrel in 2023 and $80 per barrel in 2024.

Global growth has decelerated and is expected to slow further in 2023, due to synchronous policy tightening, worsening financial conditions, and declining confidence. The world economy could slide into recession as a result of additional negative shocks, like inflation or financial stress. According to the World Bank, global recessions have been linked with large declines in oil consumption in the past, although the severity is always varied. The largest decline in oil consumption occurred in the 1980s, with consumption falling for four consecutive years.

Nigeria has been unable to take advantage of the recent oil market boom that started at the beginning of 2022 due to an increase in crude oil theft, which has disrupted production. So, while other oil-producing countries were benefitting from high oil prices, Nigeria was not. Crude oil is the main contributor to Nigeria’s gross domestic product (GDP) as of today, so crude oil theft has inflicted major damage to the economy.  Nigeria may not be able to benefit from the global oil market in the next two years, despite concerted effort to clamp down on illegal oil production and bunkering as well as the return of production at the Shell-operated Forcados terminal. According to the World Bank, energy prices will probably fall in the next few years, so Nigeria won’t make as much money from oil as it could have when prices were higher. According to the October 2022 commodity markets outlook from the World Bank, a number of factors like the Russian-Ukraine war, decreased oil production and decreased demand are responsible for the sharp decline in oil prices from February to September 2022. The projected decline in oil prices over the next two years will affect Nigeria’s revenue greatly as its economy is largely dependent on oil exports. However, it is unclear if this will affect the prices of AGO/MGO.

Source:  Nairametrics, Naijaonpoint

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