With the continued negative impact of the Coronavirus pandemic and other factors, the average price of Nigeria’s Bonny Light has dropped by 35.66 per cent in the global market, according to the spot market data obtained from the Organisation of Petroleum Exporting Countries, OPEC. Year on Year, Y-o-Y, data (spot market) obtained from the Monthly Market Reports of the organisation, showed that the average price of the premium oil grade stood at $42.24 in 2020, thus, indicating a drop of 35.66 per cent, when compared to $65.65 recorded in the corresponding period of 2019.
However, on Quarter-on- Quarter, Q-o-Q, the data showed that the Bonny Light price stood at $55.55, $21.81, $43.21, and $43.71 per barrel in the first, second, third, and fourth quarters of 2020 respectively, as against $64.47, $70.21, $63.48, and $64.44 per barrel recorded in the corresponding quarters of 2019. Generally, the authoritative data clearly showed a consistent drop in the prices of Nigeria’s foreign exchange spinner during the period under review. Driving factors The fall in the price of Bonny Light was mainly attributed to the outbreak of the Coronavirus pandemic towards the end of 2019, and its negative impact on the market throughout 2020. Specifically, the prolonged nature of the pandemic, which culminated in lockdown, characterised by restricted movement of persons and goods, the shutdown of industries, low demand for crude oil and petroleum-related products, grossly slashed demand, and by extension, the price of oil. It was also noted that the efforts of OPEC, and its allies to initiate actions toward market recovery, was also greatly weakened by the resurgence of the pandemic, even though the discovery of vaccines and other developments have, to a great extent, started to assist in the building of positive speculation, required for market rebound. Current price The price of the product currently hovers at $64.53 per barrel in the global market, which compares with others such as Brent, OPEC Basket, which prices also hover at $64.19 and $66.76 per barrel respectively. Impact Despite its relatively low nature, the price remains over $20 per barrel in excess of the $40 per barrel of Nigeria’s 2021 budget reference price. The budget was benchmarked on the production of 1.8 million barrels per day, including condensate, which is not usually considered as part of the nation’s output by OPEC.
But it had much negative impact on the nation’s Gross Domestic Product, GDP, especially as average Nigeria’s oil output dropped Year-on-Year, Y-o-Y, by 15 per cent to 1.5 million barrels per day, (excluding condensate), in 2020, compared to 1.7mb/d recorded in the corresponding period of 2019, according to data obtained from OPEC. In its 2020, GDP report, the LCCI stated: “The economy ended the year 2020 in a negative growth region, with annual GDP growth declining by 1.92 per cent, its lowest level since 1994. From the analysis of the just-released GDP report, the following sectors were the top-performing in the fourth quarter of 2020. Quarrying and other minerals (48.42 per cent); telecommunications and information services (17.64 per cent), cement (6.59 per cent), broadcasting (4.42 per cent) and crop production (3.68 per cent).” It added: “Oil sector growth plunged further to 19.76 per cent in fourth quarter 2020, from 13.89 per cent in the preceding quarter. The increased scale of oil sector contraction was largely driven by a decline in crude output. Crude oil production fell to a record 1.56 mbpd in third quarter, third quarter 2020, the lowest level since at least 2013. This is as a result of Nigeria’s compliance to OPEC+ production reduction agreement aimed at stabilising the international oil market amid covid-19 disruptions. We note that Nigeria was compelled to make compensatory cuts as a punitive measure for exceeding production quotas. In annual terms, oil sector growth contracted by 8.89 per cent in the year 2020, compared to 4.59 per cent in the year 2019. Meanwhile, the oil sector continued to grapple with policy and regulatory challenges.” Forecast From all indications, available data showed that Nigeria should not expect to witness the oil market rebound in the short term, but mostly in the medium and long run, as OPEC and other stakeholders would have been able to find lasting solutions to the various problems that stare the market in the face. Speaking at the just-concluded 11th International Energy Agency’s International Energy Fund OPEC Symposium on Energy Outlooks, via video conference, Dr. Mohammad Barkindo, OPEC Secretary-General, said: “While there are grounds for optimism that 2021 will be the year of recovery, there are many uncertainties ahead. Much now depends on the outcome of this race between a mutating virus and vaccines to end the pandemic, and on the ability of policies to provide effective support until that happens. There remains tremendous uncertainty and prospects vary greatly across countries.” Experts However, in an interview with Energy Vanguard, Dr. Bala Zaka, a Port Harcourt-based Energy analyst, who noted the various dangers of over-dependence on petroleum, including frequent progression and retrogression of economic activities, called for urgent diversification of Nigeria’s economy.