The largest oil producer in Africa, Nigeria, caught up in the Saudi-Russian oil price war, has reduced its crude oil considerably and tried to pump as much as possible to keep customers in the unprecedented decline in demand.
However, the price to be paid in the oil price war could be too high for Nigeria.
Currently, Nigeria’s only answer is to reduce its oil and pump oil to its maximum, the country’s petroleum, Minister Timipre Sylva, said in an interview with Bloomberg.
Africa’s largest producer is also calling on Saudi Arabia and Russia to end the price war, and welcomes the United States’ appeals to OPEC leader Saudi Arabia to rethink its strategy of flooding the market with oil next week.
Earlier this month, Nigeria discounted its primary crude varieties Qua Iboe and Bonny Light and will sell them to Dated Brent in April at a discount of $ 3 a barrel. Even with the highest discount in decades, Nigeria may not be able to sell all of its April loads, trader Bloomberg said this week as oil demand is falling and other oil producers are also heavily discounting their crude oil.
Nigeria’s position in the oil price war is not very strong as most export earnings are based on crude oil sales.
According to Fitch Ratings, the breakeven oil price in Nigeria – the price of oil needed to balance the state budget, in otherwise the same conditions – is $ 144 a barrel, the highest among the major oil producers in the Middle East and Africa, including Saudi Arabia , Bahrain and Oman, Kuwait, Abu Dhabi and Qatar.
The destruction of demand and low oil prices will hit many African oil producers, with Nigeria leading the way with an estimated $ 15.4 billion in revenue losses from $ 30 oil this year, according to estimates by the Africa Council’s Atlantic Center this week showed.
Oil accounts for only 10 percent of Nigeria’s gross domestic product (GDP), but is responsible for 57 percent of government revenue.
“Oil also accounts for 94 percent of exports and a similar percent of foreign exchange earnings. Thus, government coffers will be hit harder than GDP, and as a result, public services in oil producers will be constrained, just as these countries scramble to shore up their health and education sectors in response to the virus” said Luke Tyburski, project assistant with Africa Center of the Atlantic Council, wrote.