Why oil prices are high but Nigeria is still broke

Oct 28, 2021|Michael Famoroti

Oil prices went past $85 per barrel (/bbl) this week, the first time this has happened in three years.

It is an incredible turnaround for oil as 18 months ago, in the depths of the COVID-19 pandemic, some oil contracts were trading for negative prices—people were paying buyers to take millions of litres of oil off their hands.

Although the oil market is known for its volatility, this latest bounce-back is particularly impressive. At the start of the year, even oil bulls were hesitant to predict prices above $60. 

Typically, Nigeria would be celebrating today. If there is one stick often used to beat Nigeria with, it's oil dependency—Stears Business took a few swings in the past.

This time is different.

Some takeaways:

  • Global oil prices are experiencing the highest price increases we’ve seen in over a decade. 

  • But with oil at $85 a barrel, the Nigerian government is still broke.

  • Global gas shortages. Moribund oil wells. Stubborn Saudis. These are some of the factors that converged to get Nigeria to a point where high oil prices mean little for government revenues.

Bonny Light, Nigeria's benchmark crude oil grade, is selling for $86/bbl today, more than double the 2021 Budget benchmark of $40/bbl (2022: $57/bbl). Yet, there is little talk of increased government revenue or a boost in dollar reserves. If anything, economic experts are still concerned by Nigeria's borrowing. They are certain that the naira's direction is inevitably downward.

This postiton is not mere pessimism, either. The main ways Nigeria benefits

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