The global oil glut and coronavirus pandemic has started impacting on Nigerian economy as reports say that 50 cargoes of crude oil were yet to find landing while more than $3.3 billion (N1 trillion) wiped off from the stock market in just three trading days.
Also 12 cargoes of Liquefied Natural Gas (LNG) have yet to find buyers.
In spite of the visible negative signs, authorities have advised Nigerians and business community not to panic, but Mr Mele Kyari, the Group Managing Director of the Nigerian National Petroleum Corporation (NNPC), has cautioned Nigerians on poor economic climate ahead.
Kyari who spoke at the Central Bank of Nigeria (CBN) Round Table on March 11, 2020 in Abuja, confirmed that the cargoes of crude oil have yet to get landing zone because of the outbreak of COVID-19.
He also explained that there were no off-takers for the vessels for now due to drop in demand.
Continuing with the warning, he said also: “Today, I can share with you that there are over 12 stranded LNG cargoes in the market globally. It has never happened before. LNG cargoes that are stranded with no hope of being purchased because there is abrupt collapse in demand associated with the outbreak of Coronavirus.”
The situation, he said, had forced countries like Saudi Arabia to offer discount of $8 and Iraq $5 to their off-takers in some locations meaning that when crude oil sells at $30 per barrel.
As it is Nigeria is planning to adjust its 2020 budget to be in tandem with current reality. The $38 billion budget was predicated on $57 per barrel of crude oil.
The trouble in the oil and gas sector has also hit the Nigerian Stock Exchange as market capitalisation of listed equities, which opened on Monday at $46.3 billion (N13, 365 trillion), depreciated by $3.3 billion (N1, 081 trillion), to close at $43 billion (N12, 284 trillion) on March 11, 2020.
Analysts linked the massive sell off to fear of a likely devaluation of the Naira, as well as the planned downward review of the 2020 budget to reflect the new economic realities.
Mr Ambose Omordion, Chief Research Officer of Investdata Consulting, said: “The continued inconsistencies in the policy of the government and its economic managers have weighed down investor confidence as stocks doubled their losses due to fear and a lack of economic policy direction.
“The lack of coordination between the monetary and fiscal authorities is already playing out in the macroeconomic indices and policy formation, however, It is obvious that this current market situation will not last after this panicky sell down that just hit the global and local markets.”
In spite of the glaring fears, Minister of Finance, Budget and National Planning, Mrs. Zainab Ahmed, has urged Nigerians not to panic.
Ahmed explained that Nigerians must adjust to life beyond oil and also called on stakeholders to work together and seize the opportunities provided by the crisis to reset the economy.
“For us it was a shock and unexpected; we didn’t think the price of oil would go as low as $30 per barrel. So, it came to us as a great surprise. These are very strong headwinds and these headwinds reinforce a wake-up call for us as a country to look towards a life without oil and the time to do that is now.
“We have a responsibility to ensure that we do not spread panic and that we don’t allow speculation, which will not be in favour of our country. We need to put our hands together to weather this storm.
“This is not something that the government can do alone nor is it something that the private sector can do alone; it has to be a partnership- a very strong one. We need to work together to take the opportunities that this same crisis has provided for us.
“For us in government, there are some measures that we need to take which we have not taken and this is the right time to take those measures.
“We are working as a government to strengthen our macroeconomic fundamentals, which some sectors of the economy were already dished before the crisis and so the crisis is only exacerbating the situation and we knew about that.’’
The government, she explained was drastically reviewing the 2020 budget as well as redoubling efforts to raise revenue and plug the leakages and intensify engagement and support of sub-national entities.
