May 08, (THEWILL) – Oil and gas experts have predicted that Nigeria may suffer huge revenue decline, should the planned negotiation by her two major importers, India and China, with Russia succeed.
It was reported recently that Nigeria may lose its largest crude oil buyers, China and India, as both countries plan to negotiate Russian oil at discount prices.
India was said to be asking Russia for below $70 per barrel discount price.
Engr. Caleb Abanemeh, an oil and gas industry analyst, said that the supply embargo being mooted by the European against Russian oil and gas would force Russia to look for alternative consumers at all cost.
According to him, the economic principle of demand and supply, which plays a major role as the mechanism for decision making, will compel Russia to sell the commodity at a huge discount to attract viable consumers.
“India is the highest consumer of Nigerian crude, while China is the highest exporter of merchandise; both are highly industrialised and have been Nigeria’s major trade partners. If the deal with Russia succeeds, Nigeria is on the way to a severe fiscal challenge”, Abanemeh told THEWILL.
Similarly, another oil and gas analyst, Selene Alao, pointed out that Nigeria has had it good with India as the major consumer of her oil.
“But now that India, known for its conservative attitude, is looking the way of Russia, it means it will abandon Nigeria’s oil, which will be considered ‘too costly’, for cheaper supply from Russia”, she said, adding that this will worsen Nigeria’s fiscal challenge.
Nigeria is currently struggling to meet up with the OPEC production quota of 1.7 million barrels per day. The country’s current output hovers around 1.2mb/d, according to data from OPEC.
The move by China and India comes as Europe considers banning Russian oil, due to the country’s invasion of Ukraine.
It could be recalled that the OPEC’s Secretary-General, Mohammad Barkindo, during his address at the Offshore Technology Conference, OTC, in Houston last week, reiterated that there was no replacement for Russia’s seven million barrels per day oil market supply.
The European Commission had proposed a full ban on Russian crude oil m, following the continued attack on Ukraine, hence China and India are approaching Russia for negotiations.
Although the proposed ban has sent oil prices above $108 per barrel, reports say countries are beginning to negotiate discount as low as $30 per barrel, with India and China being the latest negotiators for $70 per barrel and below to compensate for logistics, financing and sanctions troubles.
If India and China succeed in persuading Russia to sell at discounted prices, Nigeria will then lose its largest buyers as reports say India could import as much as 15 million barrels of Russian oil starting from May.
Nigeria’s exports of crude oil to India were valued at $4.56 billion in 2020, while export to China was $1.02 billion, according to the United Nations COMTRADE database on international trade.
At 10.08am (Nigerian time) on Friday, Brent climbed to $112.60 per barrel, adding $1.54 or 1.39 percent after a closing price of around $110 per barrel.
The European Commission President, Ursula von der Leyen, said at the European Parliament that as part of the sixth package of sanctions against Russia over its invasion of Ukraine, the Commission was proposing a complete ban on Russian oil imports starting at the end of the year.
“Let us be clear: it will not be easy. Some member states are strongly dependent on Russian oil. But we simply have to work on it. We now propose a ban on Russian oil. This will be a complete import ban on all Russian oil, seaborne and pipeline, crude and refined,” von der Leyen said.
“We will make sure that we phase out Russian oil in an orderly fashion, in a way that allows us and our partners to secure alternative supply routes and minimise the impact on global markets. This is why we will phase out the Russian supply of crude oil within six months and refined products by the end of the year”, the Commission’s president said.
About the Author
Sam Diala is a Bloomberg Certified Financial Journalist with over a decade of experience in reporting Business and Economy. He is Business Editor at THEWILL Newspaper, and believes that work, not wishes, creates wealth.
