Crude oil prices drop further to $46.69 a barrel

•Fuel subsidy payment slides to 90 kobo per litre

THE price of Organisation of Petroleum Exporting Countries (OPEC) basket of 12 crudes fell further to $46.69 a barrel Wednesday, compared with $48.99 the previous day, representing the lowest price since April 2009.

  The meltdown in crude oil prices fueled by oversupply and sluggish demand growth has caused the commodity to plummet more than 55 per cent from its June peak of $107.

  With the price of the global benchmark Brent crude at $46.69 per barrel Wednesday, Nigerian government is now paying just 90 kobo as subsidy for a litre of petrol.

 Against the backdrop of the fall in global oil prices, the landing cost of petrol dropped to N82.41 per litre as at Wednesday, from N127.57 on November 3, according to report from the Petroleum Product Pricing Regulatory Agency.
  Subsidy refers to the money paid, usually by the government, to keep prices below what they will otherwise be in a free market system.

  With the retail price of petrol at N97, the Federal Government’s spending on petrol subsidy has, therefore, fallen to a five-year low of N0.90 per litre, compared to N44.94 in November 2014.

  Nigeria has changed its benchmark twice in the last few weeks, from $78 to $73 and lately to $65.

  Crude oil, which accounts for more than 70 per cent of government revenue and 95 per cent of foreign-exchange income, has fallen in price by 37 per cent this year.

  Experts believed that the price of crude oil would still fall below $40 a barrel over the coming months as market forces shake out the weakest producers, hence the need to diversify the economy.

  The Director-General of Lagos Chamber of Commerce and Industry, Muda Yusuf, said that the current scenario of sliding oil price is significant and scary.

  “For an economy that is 95 per cent dependent on oil for its foreign exchange earnings; and 85 per cent dependent for revenue, this development should be a cause for concern.

 “The single most important vulnerability of the Nigerian economy is the heavy dependence on oil.  Crude oil market conditions have profound implications for the Nigerian on the economy.  Current trend with oil price pose major downside risks to some key macroeconomic variables and the general economic conditions”, he added.

  Yusuf therefore believed that the decline in crude oil prices would assist in the reduction of what the Federal Government spends on fuel subsidy.  

  “The good news in all of these is the likely moderation of cost of fuel importation.  This is well known to be a major burden on the finances of the country.  The share of the nation’s resources committed to fuel importation and fuel subsidy is horrendous and perhaps scandalous.  It is hoped that declining oil price would moderate this cost”, he said.