With Joe Biden’s election as the 46th President of the United States, the demand for oil in the global market could record a massive nosedive as Biden pushes for a renewable energy-driven economy.
Analysts say the transition of the US economy from fossil fuel to one driven by wind, solar, and other renewable energy sources, means that country like Nigeria whose economy is heavily dependent on oil revenue will be tremendously impacted.
Biden is a proponent of renewable energy and his assumption of office will create a situation where US demand for oil will drop, says a Research Analyst at FXTM, Lukman Otunuga, on Thursday.
While fielding TechEconomy.ng’s question during a virtual media roundtable, Lukman Otunuga said that Nigeria’s economy is not expected to quickly recover from the depressing effects of the Covid-19 pandemic, and other economic downturns such as low domestic production and uncontrolled inflation.
The Nigerian government is looking forward to funding it’s 2021 budget largely from oil revenue despite its claims that it’s diversifying the country’s economy for many years.
Nigeria’s proposed expenditure is N13.08 trillion while the price of crude oil is pegged at $40 per barrel with a daily production estimate of 1.86 million barrels.
“Just like we witnessed last year when the 2020 budget was revised; oil prices have always tumbled far below the benchmark which is likely to affect the present budget,’ said Otunuga. “Nigeria is still exposed to external risks”.
However, the World Bank forecasts that crude oil prices would rise gradually from an average of $42 per barrel in 2021 to $44.5 per barrel in 2022 and $47pb in 2023. It is also expected that Brent crude oil prices may average $41 per barrel during the second half of 2020 and $50 per barrel during 2021.
We seem to be great at putting ourselves in a tough position from the beginning, the crude oil they put at 40 dollars and 1.86 million barrels, are we hitting these numbers right now?,” Francis Oguaju Business Advisor at Emerging Ideas Business Services said in a note on October 9.
“This is how you start recording deficits from day one. $35 per barrel benchmark would have been more reasonable, to give you some breathing space,” he said.
Nigeria and the African continent at large are optimistic that Biden’s election could mean stronger bilateral ties than Donald Trump’s, who described the continent as a shithole.
Otunuga argues that Nigeria is one of the strongest economies in the African continent and the Biden election means stronger bilateral ties. “Of course, this is not going to happen immediately but in the long term.”
He added that aside from the Covid-19 which has disrupted the economy globally, uncontrolled inflation in Nigeria coupled with low domestic production after the border closure, poor infrastructure would continue to hamper the economic growth potentials of Nigeria