Page 14 - AfrOil Annual Review 2021

AfrOil JUNE AfrOil

Higher crude oil prices

bring no joy to Nigeria

Domestic petroleum product price subsidies are acting as a drag on the West African state’s economy

BRENT crude prices have risen by more than climbed too high.
45% since the beginning of the year, reaching
WHAT: their highest point since October 2018. They Financial impact of subsidies
The increase in Brent topped $75 per barrel on June 22, up from $51.8 He indicated that his worries stemmed partly
crude prices will have a as of January 1. from the possibility that high prices might lead
limited positive impact on This rise ought to be good news for Afri- consumers to buy smaller amounts of crude and
the Nigerian economy.
ca’s largest oil producer Nigeria, which took refined fuels.
WHY: a financial hit last year when global energy “In a resource-dependent nation like Nigeria,
Abuja subsidises domes- markets plummeted in response to the coro- when [the oil market] gets too high, it creates a
tic fuel prices, so it must navirus (COVID-19) pandemic and the price big problem because your consumers shut down
spend more money when war between Russia and Saudi Arabia. After their demand. Demand will go down and obvi-
oil markets are bullish. all, when Brent prices rise, Nigerian crudes also ously even as the prices go up, you will have less
gain value, since they are indexed to Brent. volume to sell,” he said at Citizens Energy Con-
WHAT NEXT: However, the price increase is a matter of gress, a virtual forum organised by DMG Events.
The government has not concern for Mele Kyari, the group managing The NNPC chief also pointed out that high
indicated whether (or ex- director of Nigerian National Petroleum Corp. crude prices had a negative effect on Nigeria’s
actly when) it will change (NNPC). Kyari pointed out last week that the finances because of the government’s policy of
its pricing policy. country’s economy might suffer if crude prices subsidising domestic petroleum product prices.

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