By Elizabeth Chukwuma
President Vladimir Putin , of Russia Federation invasion of Volodymyr Zelensky ,home country, Ukraine, on Thursday, February 23, 2022, to forestall it from joining the North Atlantic Treaty Organisation, NATO, appears to have driven up Crude oil price in the international market. The situation has been made worse by the disparity between supply and demand for Crude oil in the International market.
The Value News Magazine which has been monitoring the developments in the international oil market since hostility broke out between Russia Federation and Ukraine, last year, could authoritatively reveal that it has positively impacted on the oil price in the international market, which many believe is good for the Organisation of Petroleum Exporting, OPEC, member countries, particular, Nigeria.
Recall that in announcing the 2022, annual budget in December 2022, President Muhammadu Buhari, a retired Army General, had put the oil benchmark, at $57 per barrel, oil production pegged at 1.88 million barrels and exchange rate of N410.15 to a dollar. Although the government had targeted that the oil price will rebound to $62 per barrel following the tension between Russia and Ukraine but it never went beyond the forcast.
The Katsina born Nigerian President who had dragged Nigeria into the World Bank, and other International Financial Organisations including the Asian country of China, to borrow money to finance basic infrastructural projects across the country due to lack of funds. He can now heave a sigh of relief that the oil price has rebound at the International market.
There is no gainsaying the fact that the Russia Federation full military invasion into Ukraine last Thursday had forced the oil price in the international market to rise above $100 a barrel, raising the possibility of a return to the price of oil some 14 years ago.
Security experts view the Russia Federation attack on Ukraine as the largest of such military operations in Europe since the Balkan wars of the 1990s and possibly the world war II which had sparked concerns about supply disruptions, during a period of uncertainty in the global economy underpinned by COVID 19, worries and oil supply –chain bottlenecks.
Market analysts fear that the oil price would still soar as the Ukraine conflict would increase the risk of disruptions to Russian oil and gas supplies coupled with the sanctions from the North American country of the United States of America, US, United Kingdom, UK, France, Germany and other Western powers.
They noted that since the war has come to heartland of Europe, oil prices are likely to approach $130 per barrel by June , 2022 and even higher as the conflict disrupts Russian trade flows . Russia, according to oil watchers, is the third largest producer of oil in the world, after the United States a and the Arab country of Saudi Arabia. Russia alone , produces 10.5 million barrels per day , which is about 11% of the world total output.
President Joe Biden , of the US, may has set the stage for oil price to further go up in the international market in the next three months as he unveiled additional sanctions against Russia for invading Ukraine against all repeated ‘’ international appeals and warnings’’.
Note that UK, imports 6% of its Crude oil needs and 5% of gas from Russia. But with the US and European Union including UK sanction against Russia, it has impacted positively on the international oil market that that it has affected the country’s oil supplies to its major foreign Customers, and thus shut up the demand for OPEC member countries oil supplies.
Recall that after talking with the allies from the G7, the US President, Biden had announced measures which analyst had said would cripple Russia ‘’to do business in world major currencies, along with sanctions against banks and state-owned companies. Indeed, the current tension in the heartland of Europe, has become so worrisome that major buyers of Russia oil are no longer finding it easy to open Letters of Credit from Western Banks to cover purchases due to the sanctions.
Letters of Credit from the bank guarantee the seller’s bank that payment will be mad in full and on time. OPEC member countries may have taken advantage of the dsruptions in the Russian oil production level to push up its production and supplies in the International oil market to meet up the Customers demand worldwide. This is because of the high demand for OPEC Crude, particular, Nigeria’s brent Crude, described as one of the best in the world. Nigeria brent crude prices have never traded at $130 since July 2008 but heading to that with the tension in Europe.
IOil price was said to have risen by 15 percent in January 2022, with the global benchmark crossing $90 a barrel for the first time in seven years, even when Russia had not invaded Ukraine. With the rising oil prices in the International oil market, President Biden of the US, had promised last November to release 50 million barrels of oil from the nation’s strategic reserves to relieve the pressure on Consumers but that appears not to have made much of a difference to the difference to the importers.
While the major oil importing countries are crying over the rising oil price in the International oil market, the situation appear different in Nigeria. The Federation Accounts Allocation Committee, FAAC, had distributed N574.668 billion between the Federal government, states and Local governments in January 2022.
Out of the N574.668 billion shared by FACC, the Federal, states and local government Areas, Value Added Tax, was said to have accounted N191.222 billion and non-oil revenue, N100 billion. In encouraging the Hameed Ali, a retired Army Colonel, led Nigerian Customs Service, NCS, and the FIRS, and other revenue geneationg agencies to sustain the drive may have informed why the Buhari Administration has sustained the monthly payment of the cost of collections that was said to have been initiated by former President Olusegun Obasanjo without defaulting. The then Obasanjo Administration had approved 7% and 4%, respectively, monthly cost of collection for the NCS and FIRS, to boost their revenue drive.
FACC, may have taken advantage of the distribution of the N574.668 billion to the three tiers of government, in which the Federal government got N204.580 billion, states, N179.251 billion, and Local governments, which is third tier of government, N58.959 billion to distribute the N25.421 billion, total deductions of the cost of collection of revenue and payment into the Federation Account, to the NCS, FIRS and other revenue generating agencies.
Given the soaring oil price in the International market due to the tension in Europe and disparity in supplies and demand for oil, in the recent time, Hajia Zainab Ahmed , minister of Finance, Budge and National Planning the states Commissioners of Finance, should be happy that they would have more money to share between the second and fourth quarter of the year , as the oil price continues to soar. in the International market.
