India, one of Nigeria’s largest crude oil buyers has reduced its demand for crude oil by a whopping 70%. On March 23rd, India imposed a 3-week lockdown bringing the economy of the 1.3 billion strong population to a halt.
The total number of coronavirus cases in India rose to 6,412, while the death toll is now 199, according to the country’s health ministry. Before the lock-down, India had about 519 cases effectively rising 12 folds in under a month. India’s nationwide lockdown is currently the largest in the world.
India’s crude oil demand is estimated at about 5 million barrels of crude oil per day and the demand drop could snuff out about 3.5 million of crude off the global markets. On Thursday, OPEC member countries agreed with non-OPEC countries like Russia to cut crude oil output by 10 million barrels per day.
What this means: Nigeria relies on India for about 13% of its exports, the highest when compared to any other country. Nigeria’s export revenue to India was N628.4 billion in the last quarter of 2019 alone out of which N592.5 billion (94%) was from Crude Oil alone. Total crude oil export earnings from the country were about N3.62 trillion in the 4th quarter of 2019 alone. Nigeria’s total export to India was N2 trillion in 2019.
Nigeria’s reliance on India for crude exports shows a 70% drop in crude oil demand will significantly impact on Nigeria’s crude oil export earnings. Last month, the Group Managing Director of the NNPC complained that Nigeria had over 50 unsold cargoes of crude as oil-producing countries flood global markets with cheap crude.
Should, India’s demand for Nigeria’s crude fail to pick up later in the year, it could have a significant impact on Nigeria’s revenue situation and could further trigger another round of devaluation for the country.
Nairametrics reported earlier that Shell has declared force majeure on exports of Nigerian Forcados crude oil. The Trans Forcados pipeline exports about 240,000 barrels of crude daily. The Trans Forcados pipeline is one of Nigeria’s main crude oil terminal and was often a target of pipeline vandals and oil militants. Nigeria produces about 2 million barrels of crude daily and earned about $54 billion from crude oil and gas exports in 2019.