There are indications that Nigeria, which has been bludgeoned by declining oil prices occasioned by the COVID 19 pandemic might be in for a fresh revenue crisis as oil import from India hit a 10-year low.
This is significant because India is the world’s third-largest importer of crude, it also becomes even more significant because Nigeria relies on India for over 15% of export earnings.
A latest report from Reuters indicates that India oil imports dropped in the month of June as its refineries reduced demand due to maintenance and turnarounds. India reportedly imported 3.2 million barrels per day in June, the lowest since October 2011, and a 0.4% decline from May and 28.5% lower than the same period in 2019.
The report also indicates that July has not been any better due to weak demand due to the effect of the coronavirus pandemic.
As one of Nigeria’s largest export destinations, the country relies heavily on India’s patronage to meet its crude oil sales targets as the government braces for a negative Gross Domestic Product, GDP growth rate, and an ensuing recession.
Nigeria is India’s 13th largest country of import behind other crude oil exporters such as the US, Iraq, Saudi Arabia, and UAE. In contrast, India is one of Nigeria’s largest export destination. However, Iraq, Saudi, and UAE are ahead of Nigeria as India’s top oil import countries.
In the quarter ending March 2020, Nigeria’s export to India was N637.5 billion or 15.6% of total exports. Crude oil represented N526.8 billion of the total export amount.
India replaced the US as Nigeria’s largest export destination for crude as demand for crude increased in the second-most populous country in the world.
India has been one of the fastest-growing economies in the world with industrialization widening its appetite for crude. However, the impact of COVID-19 has halted economic growth in India.
The country is now next to the US and Brazil in countries with the most cases of COVID-19. India has over 1.4 million confirmed cases and 34, 000 in reported deaths.
Recall that Nigeria’s Minister of Finance, Budget, and National Planning, Zainab Ahmed has revealed that Nigeria collected over 56% less retained revenues in the first 5 months of the year as oil prices crashed and demand waned.
Recall also that crude oil exports account for about 90 percent of foreign exchange earnings and 80 percent of government revenue in Nigeria; thus making the country’s economy heavily reliant on the petroleum sector.