Nigeria’s current economic crunch will likely continue till 2024, as oil prices are projected to decline over the next two years.
According to the World Bank‘s latest commodity markets outlook report released on October 26, oil prices will likely experience a decline from now till 2024. The report forecast that the benchmark oil price, Brent crude, could drop from $120 per barrel in June to $90 per barrel in September. The price of Brent crude oil may also average $92 per barrel in 2023 and $80 per barrel in 2024, the World Bank outlook said.
Global growth has decelerated and is expected to slow further in 2023, due to synchronous policy tightening, worsening financial conditions, and declining confidence. Additional negative shocks, such as higher inflation or financial stress, could push the global economy into a recession. As the World Bank noted, global recessions have been associated with large declines in oil consumption in the past, although the severity is always varied. The largest decline in oil consumption occurred in the 1980s, with consumption falling for four consecutive years.
Since the beginning of 2022, Nigeria has failed to capitalize on the recent oil market boom due to increased crude oil theft which has hampered production. So, while other crude oil producers were gaining from high oil prices, Nigeria could not. Crude oil is the major contributor to Nigeria’s gross domestic product (GDP) as of today, so, crude oil theft has done major damage to the economy.
Despite recent developments in the Nigerian oil and gas industry (including a clampdown on illegal oil production and bunkering as well as the return of production at the Shell-operated Forcados terminal), Nigeria may not still be able to benefit from the global oil market in the next two years. As the World Bank projects, between now and 2024, energy prices will likely experience a decline, leaving Nigeria unable to make as much revenue as it could from high oil prices.
According to the October 2022 commodity markets outlook from the World Bank, a number of factors are responsible for the sharp decline in oil prices from February to September 2022. Some of these factors are:
In its commodity markets outlook (CMO), the World Bank forecasts that Brent crude oil prices will average $92/bbl in 2023 (close to their current level), before declining to $80/bbl in 2024.
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