Group Managing Director of Nigerian National Petroleum Corporation (NNPC), Mmele Kyari has warned Nigerians to prepare for more economic trouble in view of the current multi-year low level of crude price in the international market.
A spread of COVID-19 across over 90 countries forcing the shut-down of large economies coupled with price war declared by Saudi Arabia aimed at punishing Russia because of its refusal to acceded to further production cuts resulted in the lowest oil prices since 1999.
At the Second Consultative Roundtable with Central Bank of Nigeria (CBN) Governor tagged Going for Growth 2 in Abuja, the richest black man on earth, Alhaji Aliko Dangote also expressed disappointment at the perennial mouthing of plans to diversify the economy once there was a crash in oil prices.
In addition, Governor of CBN, Mr. Godwin Emefiele disclosed plans by the institution to stem the tide of health tourism by intervening in the health sector and so conserve foreign exchange.
Mele emphasized that the oil industry was the most important sector of the economy but lamented that Nigerian banks were still too limited to finance it.
He advised Nigerians to prepare for at least three months of hardship for the economy even if the market recovered from the price shock immediately as it would take time for the effect to wear off warning “we must assume that prices will remain low”.
“The assumption for this year is 60$ per barrel crude oil price as an average now we are facing 30 and we haven’t seen the bottom.
“Today there over 12 LPG cargos stranded globally because they have no hub because of the abrupt collapse in demand associated specifically with coronavirus.
“It is obvious and it has also hit other sectors from the production stage which is the liquid crude.
“And as today the Nigeria crude which we have 50 cargoes that have not found landing it means the traders have purchased it but they don’t know how to take it.
“Particularly Saudi Arabia and Iraq, as at yesterday Iraq drop their prices by 5$ and Saudi Arabia drop by $8.
“So when your crude oil sells by $30 and you are dropping it by $8 it means that you are selling it at $22 and that is a huge problem which add to production value.
“That’s a huge problem that can be accommodated in some production environment like in Saudi Arabia.
“Today, the best of our production system is $15-17 a barrel.
“So, when your crude oil in any jurisdiction, there are many countries whose cost of production is $30 and we’re one of them.
“So, when the price now goes to $22 and we’re producing at $30, we’re out of business”, Kyari said.
On his part, Dagote declared Nigeria was already late in diversification.
Lamenting the cost of chaotic traffic management, he explained that three companies in the Dangote conglomerate lost at least N30 billion in profits in 2019 due to traffic gridlock in Apapa.
Dangote the country must develop its steel industry, ensure low-interest rates and secure long term funds for businesses in addition to fixing the electricity system.
Earlier, Emefiele had told the audience including Ministers of Transport, Works & Housing, Industry and Finance & National Planning, Chibuike Amaechi, Raji Fashola, Niyi Adebayo and Zainab Ahmed and business leaders that “reliance on imports contributed significantly to the challenges we now face in our agricultural and manufacturing sectors, but more importantly, it resulted in the loss of job opportunities for Nigerians.
“Our craze for imports of everything and anything supported factories, farms and the creation of jobs in other nations, while turning our industries into warehouses for these imported goods.
“If we do not deal with these issues, the challenges of kidnapping and banditry would only fester, as those involved in these nefarious activities would only resort to these activities with intensity in the absence of job opportunities.”
He said the one-day roundtable session would address some of the measures needed to drive double digital growth rate in Nigeria.