2020 is in a race with itself to shock us more and more each day, and it is winning.
Shock after shock in rapid succession has become the norm rather than the exception. At least for the millennial commentators that make up the bulk of social media commentary. While some countries are beginning to bounce back from the devastation of the novel Coronavirus, the US recorded a history making price for Oil, a negative figure price.
— Lérd Chigbo ā (@itschigbo) April 20, 2020
The confusing development has everyone worried and curious. What does it mean for the superpower’s economy and of utmost importance to Twitter users in Nigeria, what does it mean for Nigeria; one of the leading crude oil exporters in the world? Beyond the rib-cracking bants under the trends #OilCrash and #OilPrice, there is a little masked dread about a possible worst recession yet in our lifetimes.
Twitter user @SurtanLeee has this to say about it:
This setback on crude oil is going to affect Nigeria in a way we can’t control. Recession is about to play a joker card. ??
— SULTAN OF LAGOS (@SurtanLeee) April 20, 2020
Nigeria’s federal government had last month in its coordinated response to the coronavirus pandemic, cut down its oil revenue projections from 2.64tn Naira to just 254.2bn Naira – a whopping 90% cut. The federal government had anticipated a scenario in which the prices of oil are forced to drop when supply exceeds demand, which is inevitable with a swathe of the global population forced to hunker in lockdown.
— Jake aka Korean Jew Trading (@koreanjewcrypto) April 20, 2020
While Twitter users make fun of this new reality, with memes comparing the price of a barrel of oil to that of a toilet roll, many miss the fact that these prices are essentially US oil prices. West Texas Intermediate futures, which is at the centre of the oil price crash have been the benchmark for America’s oil industry for decades.
WTI is the world’s most traded financial oil contract, a benchmark followed from Zurich to New York to Tokyo, yet when it comes down to it, its core influence is the oil demand in the US. Buyers are able to enter into a future contract to collect at a later date, which is what happened until the world was plunged into a global pandemic that grounded all oil-dependent economic activities. Cars, planes, and trains are parked in major cities. Factories are shut down for the foreseeable future. Future contracts for May that buyers are unable to collect mean that WTI is forced to make payments in clearing its storage space as keeping and paying for storage is more expensive than paying to let it go.
Brent benchmark and futures which Nigeria operates on, ended the day down sharply, but still above $25 a barrel. Still, with most of Nigeria’s Brent for the month of April docked and waiting for takers, and an announcement in reaction to the sudden downfall of prices by US president, Donald Trump, that he will halt the delivery of oil from Saudi Arabia, a lot is at stake for Nigeria.
Nigeria lacks on-land storage, which means the more its unwanted crude piles up, the cheaper the country might be willing to sell. Already its oil is trading at 12USD per barrel, and takers are still limited.
There is a lot to ponder over in these uncertain times; the shift in the global power map, if and when we get through this, is one. Countries whose main claim to influence in global affairs is oil will see their standing reduced to near nothing, and as many Twitter users pointed out, perhaps war-mongering countries who for years have been accused of destabilising economies for a stake in those economies’ oil reserves, may need to reconsider their priorities.
Perhaps, and perhaps not, human memory is frail, and with forecasts indicating a rebound by the precious gooey black lifeblood powering the modern global economy, we are apt to forget very quickly how undependable it is as the sole source of any nation’s income. This therefore is as good a time as any, the best time really, for Nigeria to revisit its tired rhetoric about economic diversification. This time around hopefully with a clear sight on the future, and not a nostalgic yearning for bygone days when Agriculture as a mainstay of a nation’s economy was not a lousy route to take. What is clear is that we must rethink a lot of the ways of doing things to which we have become accustomed for decades.
Whatever other surprises the year holds for us, we sure hope it is one we can handle. In the meantime, check out some tweets from our future oil barons.
— Matt ? (@Anxious_Matt) April 20, 2020
— Ian56 (@Ian56789) April 20, 2020
— shadeEveryday (@EverydayShade) April 20, 2020