There are indications that the Nigerian government could spend more on the importation of fuel into the country as oil rose to nearly $100 a barrel on Tuesday, reaching its highest level since 2014, amid the ongoing tension over armed conflict between Russia and Ukraine alongside its Western allies.
The New Diplomat reports oil prices have been on an astronomical rise in the international market since last weekend, an indication suggesting uncertainty in the market.
Brent crude, the global benchmark for black gold, was up by $1.93, or two per cent, at $97.32, having earlier reached its highest since September 2014 at $99.50.
United States’ West Texas Intermediate (WTI) crude jumped by $2.96, or 3.3 per cent, from Friday to $94.03, with the market having been closed on Monday for a public holiday. WTI also touched a seven-year high on Tuesday as it peaked at $96.
Analyst who have weighed in on the situation have hinged the sudden rise on the importance of Russia to European oil and gas supplies. Russia provides more than a third of Europe’s supply, with some of it running through pipelines in Ukraine.
Also, President Joe Biden, on Monday had ordered heavy sanctions against Russian banks and oligarchs after Russia stepped up its confrontation with Ukraine. With the imposition of the financial sanctions, Western payments for the oil and gas could be distrupted which could be partly responsible for the high prices.
Meanwhile, with the high oil prices, The New Diplomat projects that Nigeria is expected to reap massive revenue, however, the government will also lose a chunk of that revenue to fuel importation as the nation continues to buy refined crude at high prices due to the moribund state of domestic refineries.
Recall that in the 2022 Appropriation Bill, crude oil benchmark was pegged at $57 per barrel. With oil selling between $96 to $99 a barrel, Nigeria is expected to gain whooping revenue.
But, there are indications that the country will earn little from oil price surge due to corresponding increase in expenditures.
Nigeria, though blessed with crude oil is unable to produce refined products despite having four oil refineries in Warri, Port Harcourt and Kaduna. The plants are in a state of partial shutdowns due to poor maintenance dating back to decades.