Covid-19 May Reduce Nigeria’s Oil Revenue, Says UN Report

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  • Earning likely to drop from $38.9 billion to $14bn

Obinna Chima

The raging Coronavirus, otherwise known as Covid-19, may cause Nigeria’s total revenue from crude oil export in 2020 to drop to between $14 billion and $19 billion, compared to $38.9 billion previously predicted, a United Nations Economic Commission for Africa (ECA) report has stated.

The ECA, in a report titled, “Economic Impact of the COVID-19 on Africa,” and obtained yesterday by THISDAY, noted that Nigeria’s gross oil revenue stood at N1.564 trillion as at the end of fourth quarter 2019.

The prediction was, however, predicated on crude oil price falling to $35 per barrel as well as Nigeria’s export of about 1.9 million barrels per day, a 50 per cent drop.

The report also estimated that Nigeria and other oil-exporting nations in Africa could record revenue losses of up to $65 billion due to a likely drop in demand for the commodity.

On the average, the report estimated that between 2016 and 2018, yearly export revenues from fuels for Africa were $166 billion, with the West Texas Intermediate (WTI) average yearly price for the period at $ 57.6.

It assumed an identical volume of fuels to be exported in 2020 was an average of same volume between 2016 and 2018, with average 2020 price at $35.
The report listed top oil exporters to be mostly affected to include Nigeria, whose share of total oil exports on the continent is 91.7 per cent. Others are Algeria (95.7%), Angola (97.4%), and Libya (88.4%). It identified others also to be affected as South Africa, Egypt, Equatorial Guinea, Congo, Gabon, and Ghana.

The report said, “COVID-19 could lead to Africa’s export revenues from fuels falling to around $101 billion in 2020.”
It predicted the trend of crude oil prices per barrel as follows: $61.6 (January), $53.4 (February), $35 (March), and $30 (April), saying it would continue through December due in part to the Organisation of Petroleum Exporting Countries (OPEC) policy differences.

The report also said further drops in demand occasioned by the coronavirus pandemic could compound price drops amid cancellation of flights, lower use of cars due to lockdowns, and quarantine measures, etc.

It, however, showed that of 118,000 known Covid-19 cases, less than 50 were in Africa.

Ghana, Kenya and Ethiopia reported first cases on March 13, with only 15 countries in Africa numbering among 117 countries globally affected.
It predicted that the global pandemic was expected to weaken economic growth in the region, from 3.2 per cent, to 1.8 per cent, disclosing that the continent is increasingly interconnected with the rest of the world.

The UN report pointed out that Africa was directly connected through trade links with China and Europe, and indirectly, through trade links between China, Europe and the rest of the world, through remittances and tourism.

The disease is also expected to lead to decline in foreign direct investment (FDI) flows, capital flight, and domestic financial market tightening, the report said.

Furthermore, it anticipated that in Africa, there would be disruption of global supply chains; drop in value creation; demand side shocks – oil, tourism, remittances; slowdown in investment, hence job losses; and inflationary pressures due to supply side shortages.

The report added, “There could be unanticipated increases in health spending of up to $10.6 billion and revenue losses could lead to unsustainable debt.
“The decline in commodity prices could lead to fiscal pressures for Africa’s largest economies, making it impossible to respond to COVID-19 crisis.”
The report disclosed that in past crises, Africa’s tourism experienced losses of up to $7.2 billion.

According to the report, “All African countries are net importers of medical and pharmaceutical products. COVID19 affected countries are Africa’s main exporters.

“Medical and pharmaceutical products imported from the EU27 (51.5% of Africa’s total imports) but also India (19.3%) and to a lesser extent Switzerland (7.7%), China (5.2%), the US (4.3%) and the UK (3.3%).

“From Africa, South Africa is the largest source of imports (2.2% of Africa’s total imports). African exports of medicinal and pharmaceutical products, although quite limited, are essentially directed to Africa (56.5% of Africa’s total exports), the EU-27 (16.5%) and to some extent Saudi Arabia (3.3%), the US (3%) and Yemen (2.6%).”