This was after it lifted its 40-year ban on crude oil exports. Nigeria’s economy would be hanging in the balance, if not at a precarious situation, if the country’s top crude oil buyers follow suit.
Data obtained from the Observatory of Economic Complexity (OEC), an international trade database tool that portrays visual narrative about countries and the products they exchange, revealed that from 2008 to 2018, Nigeria earned $544.68 billion from oil exports to its major trading partners.
Nigeria’s top crude oil buyers for the period under review included the US, spending $151 billion, closely followed by India with $96 billion. Brazil was in third place with $52 billion, Spain at $49 billion, South Africa spent $34 billion, the Netherlands and France both spent $33 billion each.
In 2011, there was a spike in crude oil sales from Nigeria which could be attributed to global cuts in oil supply by OPEC countries making the US, India and Brazil double their demand from Nigeria.
The African giant realised $80.2 billion from crude oil sales that year. The highest amount raked in from crude oil exports by Nigeria for the period under review.
However, the boom in crude oil exports in 2011 was short-lived, as crude export sales fell to $71.6 billion in 2012 due to a drop in the sale of crude to the US by 44.5 per cent.
Though India, the Netherlands, Spain and the United Kingdom increased their crude oil demands from Nigeria, it did not increase the country’s oil revenues compared to the previous year.
India overtook the US in 2013 to become Nigeria’s biggest export destination for its crude oil prompted by a shift in crude demand by the US which turned its attention to shale production making Nigeria suffer a 43.2 per cent drop in crude sales.
In a 2019 report, titled “Nigeria Economic Outlook” released by PricewaterhouseCoopers (PWC), it was stated that fluctuating prices of crude oil in the global market with stagnating demands would leave Nigeria’s oil-driven economy vulnerable to external shocks.
“With the Organisation of Petroleum Exporting Countries (OPEC) lowering Nigeria’s crude oil production level to 1.685 million barrels per day with hopes of raising the prices. We expect this cut coupled with fluctuations in oil price and potential supply disruptions to impact Nigeria’s 2019 budget implementation,” the report states.
Consequently, the report noted that increased failure of OPEC members to comply with the production cuts agreement and increasing global shale production could pose a threat to the Nigerian oil-dependent economy because of the likelihood of lower crude oil prices in the global oil market which might be prolonged.
Records showed that key countries that were major export destinations for crude oil from Nigeria namely Germany, the US and Brazil had lowered their demand significantly.
Between 2013 and 2017, Brazil reduced its purchase of Nigeria’s crude by 94.9 per cent from $8.3 billion crude purchase to $425 million, while Nigeria saw a 78.3 per cent reduction in sales to Germany from $5 billion to $1.1 billion between 2012 – 2016.
Also, the US has virtually stopped the importation of crude oil from Nigeria with the U.S oil exports rising at 260,000 barrels per day in June to a monthly record of 3.16 million barrels per day.
The six-year drop in crude oil sales which started in 2011 continued in 2016, as Nigeria raked in $22 billion, signifying a 31.8 per cent drop in sales compared to the $32.2 billion made in 2015.
From 2015 – 2018, Nigeria’s top six crude oil buyers included India at $31.2 billion, Spain with spending at $15.2 billion, the US with at number three with $14.6 billion, South Africa spent $12.3 billion, the Netherlands bought $10.5 billion worth of crude oil and France is at number six with $10.3 billion.
Between 2011 and 2014, the top six buyers are the US sitting in first place with $57.7 billion, India spent $50.9 billion, Brazil is at $32 billion, Spain spent $25.1 billion, Germany $18.7 billion and the Netherlands at $17.7 billion.
Analysis by The ICIR reveals that for Nigeria to maintain a high oil income and become fiscally viable, traditional stronghold countries for oil exports namely Brazil, Germany, Spain, India and the Netherlands must remain its top buyers and increase their purchase by 40 per cent.
However, the widening fiscal deficit of the federal budget, which has risen to a decade high of N3.8
trillion in 2017 from N2.2 trillion in 2016 indicates danger for the Nigerian economy if oil remains the mainstay of the economy.
A PWC projection for 2019 hints that oil revenues for the country would under-perform the 2019 budget by 27 per cent which would be prompted by a shortfall in oil supply. This means the fiscal deficit would likely increase by 79 per cent to N4.55 trillion with debt service to revenue earnings expanding higher than the projected 31 per cent in the budget.