The fall in the price of oil as a result of the coronavirus had led OPEC last Sunday to a meeting which there agreed to cut production nearly 10 million barrels per day (mbpd). The 9.7 mbpd cut which exceeds 2008’s record 2.2 mbpd cut will come into effect in May and June.

This move was suppose to address glut which will affect negatively the price of oil

However, the oil market has been unable to find support as Brent, the benchmark crude slid below $30 shortly after the announcement. As of 17:00 GMT+1 Friday, Brent sold for $28.46 on the futures market.

The anticipated higher price would have helped ease pressure on the naira which is said to be overvalued after CBN’s devaluation to N360/$. This would have reduced currency volatility risk that has caused foreign capital flight whilst improving balance of payment position and reducing potential earnings risk to the oil-dependent economy.

According to report foreign Reserve of the Central Bank of Nigeria (CBN) stood at $33.908m as of Friday compared to $36.932m mid-February.

Nigeria’s ability to meet its foreign-denominated obligations has also been put on the spotlight by global rating agencies including Fitch which in late March downgraded Nigeria’s long-term foreign-currency issuer default rating (IDR) to ‘B’ from ‘B+’ with a negative outlook citing external and fiscal pressures.

Oil market watchers say the reaction of the market has been affected low demand for oil which has fallen by a third since the pandemic.

With most of the world’s largest economies under lockdown and key oil-consuming sectors like Aviation and Manufacturing affected, investors, do not believe the supply cut would be enough to balance the market, hence a short-term over-supply would remain till lockdown is lifted, they say.

There has been report also of the oil price going down to the point of zero level, which means producers paying for the product to be cleared from ground.