Oil Price: Nigeria to benefit from higher foreign exchange earnings as Bonny Light rose to $87.86 in March
In March 2024, the global market witnessed a significant rise in the price of crude oil, as stated in OPEC’s monthly report on crude oil movement. The OPEC Reference Basket saw a notable increase of 3.7 percent ($2.95), climbing from $81.23 per barrel in February to $84.22 per barrel in March. Similarly, the monthly averages for ICE Brent and New York Mercantile Exchange (NYMEX) Western Texas Intermediate (WTI) also experienced an upward trend, rising from $81.72 per barrel and $76.61 per barrel in February to $84.67 per barrel and $80.41 per barrel, respectively, in March. Nigeria’s Bonny Light, on the other hand, witnessed a month-on-month increase of 2.6 percent ($2.21), surging from $85.65 per barrel in February to $87.86 per barrel in March.
This surge in crude oil prices can be attributed to heightened global geopolitical tensions, which have created expectations of a more constrained supply-demand dynamics for the remainder of 2024. As a result, oil-producing countries are expected to benefit from higher foreign exchange earnings and increased government revenues, which can be utilized for infrastructure projects and social welfare programs. However, this situation presents a complex scenario for Nigeria, as it functions both as an importer of refined petroleum products and an exporter of crude oil. While the government is anticipated to receive more revenue, the discontinuation of Premium Motor Spirit (PMS) subsidies, elevated petroleum product landing costs, and currency rate fluctuations may lead to increased costs for citizens when purchasing refined petroleum products.
Therefore, it is crucial for the Nigerian government to establish systems for local production of petroleum products, enabling the full realization of benefits from crude oil resources. The recent inauguration of the Dangote Refinery is a positive step in the right direction, and further encouragement should be provided to attract investors to the downstream oil industry.
