Global Crude Oil Prices Declined in November 2023

The latest Monthly Oil Market Report from the Organisation of Petroleum Exporting Countries (OPEC) has revealed a significant drop in the price of crude oil in the global market during November 2023. Specifically, the OPEC Reference Basket (ORB) fell by 7.5 percent to $84.92 per barrel, compared to $91.78 per barrel in October 2023.

Similarly, the monthly average of ICE Brent and New York Mercantile Exchange (NYMEX) WTI dropped from $88.70 per barrel and $85.43 per barrel to $82.03 per barrel and $77.38 per barrel, respectively. Despite this decline, the price of crude oil remains above the 2023 budget benchmark of $75 per barrel. However, it is important to note that the decrease in oil prices may impact government revenues, potentially affecting budget funding and the servicing of external debts.

Additionally, Nigeria’s foreign exchange reserves are closely tied to oil earnings, and a decrease in oil prices could lead to a reduction in these reserves. This, in turn, may impact the ability of the Central Bank of Nigeria (CBN) to stabilize the naira and meet external obligations. Given that Nigeria has no control over the international price of crude oil, the low production level of 1.4 million barrels per day and limited non-oil exports increase the vulnerability of the economy to changes in oil prices.

It is crucial for Nigeria to address constraints to oil production urgently. At the very least, the government should aim to meet the assigned OPEC quota of 1.578 million barrels per day. Furthermore, the decline in oil prices highlights the importance of increasing non-oil sector exports.