Less than 24 hours after the Organisation of Petroleum Exporting Countries, OPEC, ended its 166th meeting, with a resolution to keep production quotas unchanged, oil prices dipped further close to $70 per barrel on Friday, surpassing a new benchmark proposed by the Nigerian government.
Latest OPEC Secretariat calculations on Friday showed that the price of its basket of 12 crudes stood at $70.80 dollars per barrel on Thursday, shedding $2.90, or 3.94 per cent from the $73.70 per barrel recorded on Thursday.
The development would be bad news for the Nigerian government battling to respond to one of the most serious oil price falls.
The federal government has proposed a new benchmark of $73 per barrel, from $78 approved in the 2014 budget.
The latest crash indicates the $73 benchmark may not be realistic, a concern earlier raised by the governor of the Central Bank of Nigeria, Godwin Emefiele.
Mr. Emefiele, had on Tuesday, at the end of the Monetary Policy Committee (MPC) meeting in Abuja described the new oil benchmark as “overly optimistic”, as the decline appears permanent.
But the Minister of Finance, Ngozi Okonjo-Iweala, has assured Nigerians that they have no reasons to panic, as the government has a comprehensive strategy, based on number of scenarios, to cushion the impact of the slide in crude oil price even if it were to drop to as low as $60 per barrel.
“Our scenario-based approach to managing the impact of the oil price drop is proactive and comprehensive. Even if the price drops to 60 dollars we are ready,” the Minister said at the Capital Market Retreat organized by the Securities and Exchange Commission (SEC).
“Panic is not a strategy. We are managing the situation to keep the economy on a stable sustainable course and we will not listen to those who want us to throw up our hands in despair and give up,” she added.
In an attempt to contain the situation and stabilize the economy, Nigeria has since reacted, unfolding a number of austerity measures, including a review of the oil benchmark proposed in the medium term expenditure framework (MTEF) for the 2015 budget from $78 to $73.
Prior to the OPEC meeting on Thursday, commodities market analysts had anticipated a decisive intervention of the group, by reviewing downwards production quotas of members in a bid to stem falling prices in recent times.
From a high of an average of $105.61 per barrel in July, the price slummed to about $73.47 per barrel on Wednesday, with market analysts’ projections showing average futures crude price in the next six months likely to crash to about $70.
But, at the end of the meeting, OPEC said a review of its Secretary General’s report on global oil market outlook, particularly the supply/demand projections for the first, second, third and fourth quarters of 2015, was not in favour of a decision to change the existing production quota of 30 million barrels reached in December 2011.