According to reports, Bonny Light, Nigeria’s crude oil derivative hit $98.41 per barrel on September 27, its highest level since November 7, 2022, when it slightly crossed the $100 mark. Bonny Light recorded a 3.39% increase from the $95.18 recorded the day before. This is the highest oil price Nigeria has seen in 2023, and it’s part of the ongoing trend of rising oil prices driven by limited supply.
Since the beginning of September, worldwide oil prices have been rising due to increased demand and a significant drop in crude oil supply. At the time of writing (2023-09-28: 09.10 AM), Brent Crude futures were trading above the $97 mark, representing a 69 cents increase, while U.S. West Texas Intermediate (WTI) crude rose 49 cents to trade at $94.17.
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The surge in oil prices is linked to oil production cuts undertaken by Russia and Saudi Arabia. In July, Saudi Arabia announced that they were going to cut oil production by one million barrels per day. By September, the country announced that it was extending the cuts till the end of 2023. Also, the inability of OPEC members such as Nigeria to meet up with its OPEC quota has influenced the trend in oil prices.
Nigeria, in August 2023, produced an average of 1.181 million barrels of oil per day, up from 1.081 million barrels produced in July 2023. A far cry from Nigeria’s OPEC quota of 1.3 million BPD.
Although rising oil prices might typically be seen as good news for Nigerian economic regulators, the current situation is far from ideal. The 2023 budget was set with an oil benchmark of $75 per barrel and a production target of 1.69 million barrels per day. Unfortunately, the country’s actual production level falls significantly short of this benchmark.
Nigeria’s failure to meet its production quota has significantly harmed the country’s economy. This shortfall has resulted in a severe shortage of foreign exchange, leading to a rapid depreciation of the Naira’s value, with the exchange rate crossing the N1000/$ value last week.
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The country’s foreign exchange shortage is evidenced by the Minister of Finance’s disclosure that Nigeria has an overdue forward payment of $6.8 billion. Furthermore, this scarcity is causing detrimental effects, with reports emerging of foreign suppliers beginning to decline letters of credit from Nigerian businesses.
