Nigerian FX to Suffer More as Gas Prices Drop

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CEM REPORT, FINANCE | Global natural gas prices have fallen by over 50% this January as a result of low demand from European countries.

European countries have stockpiled natural gas for the winter, although the winter turned out not to be as cold as the earlier forecast.

With this fall Nigeria whose natural gas exports account for 14% a value of $10 billion will likely experience a decline in foreign exchange.

A senior analyst at Financial Derivatives Company, Oluwatomi Mayowa, made this projection on Thursday while appearing on a Channels Television programme.

According to her the low demand for natural gas will lead to a decline in Nigeria’s foreign exchange earnings and pose a challenge for the federal government to finance the 2023 budget as a result of lower revenues.

She added that the situation may lead to more forex restrictions and rationing, forcing many people (including manufacturers for instance) to access dollars at the parallel markets.

Oluwatomi in her projection for the Liquefied Petroleum Gas (cooking gas) sector, projects that Nigeria will still need to rely on imports to make up for shortfalls in the sector while projecting that more companies will go into LPG production which will increase the country’s capacity.

She further stressed the need for more investments in the LPG sector, including the construction of a better supply system to ensure that Nigeria can become self-sufficient in liquefied petroleum gas (cooking gas) sector.

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