NIGERIA’S avoided total economic collapse earlier this year at the height of the coronavirus pandemic lockdown in April when crude oil prices collapsed to such a low level that the federal government was begging buyers to make purchases at $9 a barrel.
Being a mono-economy, over 90% of Nigerian government revenue comes from the sale of crude oil and due to the pandemic, the sector has been hit hard. Not only has oil demand collapsed due to the shutdown but prices have all dropped significantly, making it impossible for Nigeria to fund her 2020 budget which was predicated on selling 2.1m barrels at a minimum price of $57 a barrel.
In June, the World Bank warned that the collapse in oil prices and the Covid-19 pandemic could push the Nigerian economy into the worst situation since the 1980s. In the early to mid 1980s, Nigeria suffered a similar fate when global crude oil prices dropped from around $40 a barrel to $8 a barrel.
With limited revenue coming into government coffers, Nigeria’s finance minister Zainab Ahmed has been forced to resort to borrowing to fund the 2022 budget. Since the pandemic struck, the government has borrowed about $10bn from the World Bank, International Monetary Fund and African Development Bank.
Mallam Mele Kyari, the group managing director of the Nigerian National Petroleum Corporation (NNPC), said things got so bad that buyers were begged to purchase Nigerian crude at $9 per barrel in April. He added: “Actually, we sold oil at $9 per barrel in April and practically we begged people to come and take it.”
According to Mallam Kyari, Nigeria produced 2.49m barrels per day in April, adding that the target of 3m barrels was achievable. He pointed out that 2020 had been a difficult year for the industry and the world economy, stressing that the industry fundamentals had changed.