Fresh threat for Nigeria’s revenue as Us-china trade war intensifies
…China devalues Yuan, continues to buy Iranian oil ...halts import of US agric products ...opportunities open for Nigerian soybeans
Nigeria’s revenue projections may be facing a fresh threat as the trade war between the United States and China gets fiercer. The intensifying trade war could see oil price sink to as low as $30, Bank of America Merrill Lynch warned on Monday.
In its 2019 budget, Nigeria projected oil to sell at an average price of $60 and national production was projected to grow to 2.3 million barrels. The proposed Federal Government budget estimates N6.97 trillion revenue for the 2019 fiscal year. The oil sector is expected to contribute around N3.73 trillion, while N710 billion will come from
the proceeds of government equity in Joint Ventures.
But the Bank of America Merrill Lynch, an American multinational investment bank, noted that a further deterioration in relations between the US and China could set off a chain of events that would push oil down more than 50 percent to as low as $30.
“While we retain our $60 a barrel Brent forecast for next year, we admit that a Chinese decision to reinitiate Iran crude purchases could send oil prices into a tailspin,” a Bank of America Merrill Lynch Global Research report said, warning that prices could sink by as much as $20-30 a barrel in that scenario.
The US and China, two world superpowers, account for about 34 percent of the global crude oil. The commodity also accounts for 2/3 of Nigeria’s revenue and nearly all of foreign exchange earnings.
China, the single largest buyer of Iranian crude oil before the US sanctions hit the Islamic Republic’s oil exports, continues to import oil from Iran despite the ‘zero exports’ maximum pressure campaign of the United States. China has said that it wouldn’t comply with the US sanctions on Iranian exports.
According to sources, China and other countries are receiving oil shipments from a larger number of Iranian tankers than was previously known, defying sanctions imposed by the United States to choke off Tehran’s main source of income.
International Brent crude oil stood at $60.53 per barrel by 3pm Nigeria time on Monday, indicating there is nothing in excess of Nigeria’s 2019 budget benchmark.
When oil prices found a floor around $40 in the first quarter of 2016, the Nigerian economy slid into a recession and the Central Bank of Nigeria (CBN) began restricting scarce forex for what it considers important items and began to artificially prop the naira to maintain exchange rate stability. The long-term effect of these controls is an
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