Brent set for weekly gain of 15%

The Brent crude futures are on track for a weekly gain of about 15%. Femi Ojumu, Senior Partner at Femi Ojumu & Co., shared insights on the dynamics impacting oil prices and how they affect Nigeria in an interview with CNBC Africa. The recent surge in oil prices can be attributed to the phased reopening of economies in Europe and Africa, such as Ghana and Nigeria. However, Ojumu emphasized that Nigeria must focus on diversifying its economy, as the volatile nature of oil prices remains a significant risk. The COVID-19 pandemic has caused a sharp drop in global demand, particularly in the aviation industry, leading to uncertainties in the market. While the increase in oil prices is good news, it is not a reason for immediate celebration as there are still challenges ahead. The reopening of economies has boosted demand, but Nigeria's budget was based on a higher oil price of $57 per barrel, making it difficult to achieve breakeven at the current price levels. Furthermore, Ojumu highlighted the importance of OPEC and OPEC+ countries adhering to production quotas to maintain market stability and efficiency. Compliance with supply cuts can help manage demand and prevent a glut in the market, ultimately supporting price increases. Despite these positive developments, Nigeria continues to face challenges in selling its crude grades internationally due to a backlog of crude stock. The production quotas being respected by OPEC and non-OPEC countries should gradually ease this issue. Ojumu also addressed the impact of government revenues from the oil industry, citing the recent news of Nigeria expecting around 103 billion Naira from gas flaring penalties. He emphasized the need for oil companies to take concrete actions to reduce gas flaring and address environmental concerns. The enforcement of policies and laws relating to gas flaring must be strengthened to ensure environmental protection. Ojumu urged for timely and effective measures to be implemented, emphasizing that excuses for inaction are no longer acceptable in the current environment. The challenges facing Nigeria's oil industry underscore the importance of proactive strategies and sustainable practices to navigate the evolving market dynamics.