Nigeria may loose petro-dollar windfall from crude price

by Omodele Adigun

ace crude price surged to a new high of over $103 per barrel last week, amid the ongoing Russia-Ukraine war; Western sanctions barring Russian banks & companies’ access to US dollars and British pound Sterling, there is palpable fear that Nigeria may not benefit from the multi-billion petro-dollar accruals from the price volatility.

According to Professor Keneth Ife, faculty member at NDA and CBN Programs facilitator, whatever Nigeria may stand to gain from the current global tension, in terms of windfall, may either go up in flames or go down the drain in the hand of the Nigerian National Petroleum Corporation (NNPC).

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About $12.4 billion oil windfall accrued to the country during the Gulf War in 1991 as international oil price flared to an unprecedented level.

Giving reasons for his fear, Ife said: “The price of Brent crude has jumped above $100 now to about $103 per barrel. So the more tension now, the more the price of crude oil is going up. And Nigeria can not enjoy the windfall because NNPC is doing crude swap arrangement with all these countries refining for us; they will send crude oil directly to all these international companies refining for us and then take PMS back. So we are not getting the $3billion every month they say NNPC was selling. If we are getting that money for the whole of 2021, there would have been a lot of dollars around to calm down the exchange rate. But NNPC cornered all that. So if it increases now, we won’t see it. They would now tell us that the subsidy has gone up to N10billion. They just resort to burning the money that comes from that crude. So it (crude price) will be rising and we will be in pain.”

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On the waves of sanctions that hit Russia from the Western world in the wake of Ukraine invasion, Ife ruled out the possibility of negatively impacting Nigeria. He reasoned that Nigeria, being a non-aligned nation, does not hold Russian currency in reserves; nor does Russia buy oil from us. They are exporters of oil just like we are exporting.”

He added: “At bi-lateral level, there is nothing to worry about. The people that are really warning about this war are members of NATO. NATO are the ones taking these sanctions against Russia. And, of course, led by America. They are the ones applying sanctions. If there are any reactions from Russia, they are targeted at those countries that are closing down their contracts and revoking landing rights of their airlines and those stuffs. I think Nigeria has not got that stage yet. What may happen is that if Nigeria has projects that Russia is committed to, and if the projects are going to be funded through a dollar-dominated loan, then that loans would face some challenges. But Nigeria’s central bank may decide to do a currency swap arrangement with Russia and we would start trading between ourselves without bringing Dollars into it, just like we are doing with China by bypassing dollars.

“But if Nigeria does what Ghana is doing by openly condemning Russia, it would just put the arrangement between Nigeria and Russia in the cooler. And they will get back to us at the United Nations. And, again, we will be watching how the African Union would vote when the Russia-Ukraine matter comes up at the AU. And we are not holding Russia currency in reserves; they are not buying oil from us. They are exporters of oil just like we are exporting.”

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