Briefing Note: Future Direction of Crude oil prices
The medium term pricing for crude oil will be determined at the upcoming Doha Confrence promoted by Saudi Arabia; Russia and Venezuela who want a production cut
Iran on the other hand has reached 2mbpd output and says it has a target of 4mbpd….also says it won’t cut output until it regains its market share lost during the sanctions.
Thus if Iran wont cut output…i dount Saudi Arabia will
Thus it appears the rise in oil prices will be moderation by Iran decision, which indicates a maintenance of current depressed prices.
What does this mean to Nigeria?
Lower than budgeted oil prices mean the government defict won’t be “saved” by commodity earnings inflow. …thus the sovereign borrowing via FGN bonds will continue. Should the deficit increase; then we expect yields to stay high to attract investors.
What does this mean for the investor?
As FGN yields remain high; variable yield ie equity markets will remain depressed.
Its important every investment made is benchmarked against the risk-free rate offered by the Federal Government.
Watch inflation at 11%, its important to determine the real rate of return when comparing investment.
