I had to write this post for several reasons. Many of us are about to get poorer – without casting and binding, I ask that you hear me out first. If you don’t watch the news, let me help you out, I do. If you do watch the news, in lay mans terms – Iran’s blessing will become Nigeria’s downfall. Lets examine this and lets discuss ways we can possibly insulate ourselves and the nation as a whole – I doubt those people ( Nigerian Leaders) really care, but i will lay out the facts to the best of my ability – I am no economist, but years in economic research and common sense have resulted in certain deductions.
1. Iran is a significant oil producer in the world – it is number 3 for proven oil reserves in the world and number 2 for proven gas resolves in the world.
2. Iran has enough oil to supply China for the next 40 years. China and India are currently significant markets – so between Russia and Iran – consider the far east sorted out. Lets not even discuss the existence of alternate energy in these markets.
3. The raising of sanctions on Iran – means that the U.S and other E.U nations can buy crude from Iran… The US is already the largest oil producer in the world- so unless its shale is cheaper than what Iran is peddling, it will be buying from Iran.
4. Saudi Arabia has refused to reduce its daily output, this combined with Iran’s capability of 6 million barrels per day(3x Nigeria’s capacity) by the way means the market will be awash with crude oil
5. Iran currently has 30 million barrels of crude oil stockpiled for sale – that’s Nigeria’s 15 day production waiting to be sold literally.
For Nigeria this has several implications
1. Our earnings will significantly decline because oil prices will drop – the demand is constant, while supply is growing. So less money to fund our budget which is bench-marked against a $52/ barrel price. As of July 14 2015 oil prices were around $51 per barrel at best.
2. A PIB – Petroleum Industry Bill that is not favorable to oil majors will see them exiting the country – If you work for an oil company if you have not dotted your I’s and crossed your T’s, now may be the time to buckle up. So the Senate that has been dragging feet on the PIB – well now you see.
3. We import refined products. While petrol etc would end up being cheaper, the fact that the value of the Naira is going to depreciate further will mean that we may end up paying more than the current N87 per litre despite crude oil prices likely dropping below $50 per barrel before the year runs out, the Naira will be useless against the dollar. Unless we fix our refining capacity and supply our own local consumption – the math will not make sense.
4. The dollar may reach N300 before the year runs out. We are heavily dependent on importation – so the price of everything is going to go up. Our paychecks aren’t going anywhere near upwards though.
Unless the US congress opposes the Iran deal, we are likely screwed. And if they oppose with the requirement of adjusting the deal, it only buys Nigeria some more time to try and arrange her house. Iran however is on a mission and at a minimum within its first month of exports may be able to do 1 million barrels per day supplying the markets Nigeria already supplies.
Now its looking like presenting bills to clients in dollars is the way forward – Yes it’s illegal, but is Nigeria well equipped to deal with what is coming her way? You must sit and wonder why we are still so un-imaginative as a country – these talks have been ongoing for two years at a minimum…so what gives?
Have you given this much thought? Or you just kind of blew it off as oh well great for Iran? Or finally America has stopped its hatred propaganda?
I had to break my 1 post a day rule, because I am honestly curious as to what folks are thinking.