Key highlights

• Several factors could contribute to the resurfacing of a global recession and spark a fall in oil prices which could impact the Nigerian oil market.
• However, the Nigerian oil market is on its way to recovery. But, if a global recession happens, the reduced oil revenues could negatively affect Nigeria as the country struggles with increased debt and social challenges.
• Currently, there are reports that Nigeria is on its way to achieving 1.6 million barrels per day of crude oil production.

There are fears of a global recession and this could mean lower oil revenues for Nigeria as a crude producer. Dumebi Oluwole, a Senior analyst at Financial Derivatives Company said this during a recent interview via Channels Television. According to her, the fears of a global recession have resurfaced and are even more intense.

This is based on what has happened with the global banking system, the monetary policy tightening by the US Fed, European Central Bank (ECB) as well as in Nigeria. These will affect oil prices because just like in past years when there was a global recession, there will be low oil prices. She said:

“If the global economy slips into a recession, we will see oil prices slip below $80 per barrel. When we bring this home to Nigeria, it just means lower oil revenues, also, with the commitment of the government to remove fuel subsidies, the imports of refined petroleum products will decline and the federal government might have just a little more money to do other things in the economy.

“A significant thing to mention is that during the MPC meeting, one of the reasons why the monetary policy committee hiked interest rates, was more of a precautionary move to anchor inflation expectations ahead of the fuel subsidy removal.

The expectation is that if the fuel subsidy is removed, inflation will increase further and that is because transport costs will also increase due to higher fuel prices. If that happens, the cost of living will also increase.”

More Insights

Earlier on, Nairametrics had reported that the collapse of the Silicon Valley Bank (SVB) had impacted oil prices as Brent crude price fell below $80 per barrel on March 13 for the first time since February 2023.

Before the SVB collapse, analysts had said the global oil market was impacted by the announcement of further interest rate hikes by Federal Reserve officials, which had become widened by the SVB collapse.

Meanwhile, Nigeria is on track to reach 1.6 million barrels per day

A March 31 Reuters survey showed that among participating countries at the Organization of Petroleum Exporting Countries (OPEC), Nigeria posted OPEC’s biggest increase in March 2023. According to Reuters, Nigeria could be getting closer to a target to lift output to 1.6 million barrels per day as expected.

Reuters reports that there was a significant drop in production in Angola and Ira. However, Gulf producers like Saudi Arabia, Kuwait and the United Arab Emirates maintained high compliance with their targets under the OPEC+ agreement.

What you should know: In 2022, OPEC+ agreed to cut oil production to support the market and the group will meet on April 3, to decide on this ongoing policy.

• As of Saturday, April 1, the Brent crude oil benchmark price was $79.89 at 2:41 (GMT+1), and the Bonny Light benchmark was $79.33.