Nigeria’s revenue from crude oil is currently being threatened, as one of its importers, Indonesia, plans to decrease imports from other countries, while increasing imports of crude oil and liquefied petroleum gas from the United States by around $10 billion, as part of its tariff negotiations, energy minister Bahlil Lahadalia told local media on Tuesday.
Nigeria was listed as one of the top crude oil suppliers to Indonesia last year.
Data sourced from Kpler showed that Indonesia imported around 306,000 bpd of crude oil last year, with Nigeria, Saudi Arabia and Angola as the top suppliers.
Indonesian officials are set to leave for Washington later on Tuesday for negotiations over proposed U.S. trade tariffs.
In total, Indonesia plans to buy U.S. goods worth $18 billion to $19 billion as it seeks to eliminate its trade surplus with the U.S. and avoid a threatened 32% tariff on its exports.
Bahlil said the energy ministry recommended increasing the LPG import quota for the U.S., as well as importing more U.S. crude, to help reach the target.
To make room, Indonesia would need to cut LPG imports from other origins, Putra Adhiguna, managing director at thinktank Energy Shift Institute, said, adding it could start by reducing by 20%-to-30% its LPG imports from non-U.S. sources, depending on existing contracts.
Kpler data show Indonesia imported 217,000 barrels per day of LPG last year, around 124,000 bpd of which came from the U.S.
Around 23,000 bpd were imported from Qatar, while the United Arab Emirates and Saudi Arabia each contributed around 20,000 bpd.
Indonesia also imported around 306,000 bpd of crude oil last year, with Nigeria, Saudi Arabia and Angola as the top suppliers, Kpler data showed.
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Around 13,000 bpd were imported from the U.S.
Asked about the U.S. LPG import proposal, a spokesperson at state energy firm Pertamina, the biggest LPG retailer, said the company is conducting reviews of its imports and awaiting instructions from the government.
The development comes as Nigeria battles low revenue due to a crash in oil prices from trade tariffs by the U.S President, Donald Trump.
Concerns about the impact of a tit-for-tat trade war on global growth and demand for oil sent Brent crude prices plummeting by more than 20% within a week to a four-year low after Trump announced his sweeping tariffs on April 2.
Oil accounts for about 90% of Nigeria’s exports, and crude earnings were set to fund 56% of this year’s budget.
The federal government forecasted oil at $75 a barrel in the 2024 budget; however, it has been forced to change its plan.
“We are going back to the drawing board to look at our budget all over again,” Finance Minister Wale Edun told reporters last week.
The drop in oil prices forced the Central Bank of Nigeria to sell dollars to authorised dealers to lower the shock against the naira.
In a circular on Sunday, CBN said it has facilitated market activity on Friday, with the provision of $197.71 million through sales.
According to the apex bank, the move is in line with its commitment to ensuring adequate liquidity and supporting orderly market functioning, adding that the measured step aligns with its broader objective of fostering a stable, transparent, and efficient foreign exchange market.
The drop in the price of crude oil is also undoing frontier markets debt trades that had held up for at least a year, JPMorgan said in a research note.
It cited the Nigerian carry trade, which involved investing in the oil exporter’s Treasury bills on bets that the naira currency would not depreciate quickly against the dollar. Investors now risk incurring losses if the lower crude price hits the naira.
Although prices have since recovered some ground to around $66 per barrel from below $60, they are well below the average budget assumptions of $69 across the main oil exporters’ year-ahead projections, as calculated by Morgan Stanley.
The federal government forecasted oil at $75 a barrel in the 2024 budget.
Oil traded above $70 per barrel before President Trump slammed the tariffs.
Turkey, India, Pakistan, Morocco and much of emerging Europe, relying on oil imports, are set to see some benefits from lower prices of crude.
However, investors say oil-exporting states, including Gulf countries, Nigeria, Angola, Venezuela and to some degree Brazil, Colombia, and Mexico, will feel the pain of losing a chunk of hard-currency revenues.
“Losers will be hit relatively harder than the upside seen in importing countries. Oil exports often contribute considerably to public finances, which will spill over into credit risk premiums”, a portfolio manager for emerging market debt at Janus Henderson Investors, Thomas Haugaard, told Reuters on Monday.
A sustained drop in the price of oil could undermine recent progress on economic reforms and even reverse progress in Nigeria, analysts have said.
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