Rising crude oil prices are set to send Nigeria’s bill for fuel subsidies rocketing, threatening to exacerbate the already precarious economic situation of Africa’s largest oil producer as it heads into election season.
Although Nigeria produces 1.7m barrels of crude per day, it has very little refining capacity and imports roughly 90 per cent of its fuel, negating much of the benefits oil-producing nations accrue from high crude prices.
When crude prices plunged to about $30 a barrel in 2016, it sent Nigeria’s oil-dependent economy reeling into a recession from which it has barely recovered. While a rally has since pushed the oil price past $85, Africa’s most populous country is not set to reap the benefits. This is because its subsidy bill is likely to surge beyond the $3.85bn annual tally the oil minister estimated earlier this year when prices were 20 per cent lower, said Tunde Ajileye, a partner at SBM Intel, a political and economic risk consultancy.
That is from Neil Munshi at the FT.