SAUDI ARABIA IS SET TO SECURE $10 BILLION LOAN, FIRST IN 25 YEARS: CASH CRUNCH A CONTAGIOUS PHENOMENON AMONG OIL PRODUCING COUNTRIES!
SAUDI ARABIA IS SET TO SECURE $10 BILLION LOAN, FIRST IN 25 YEARS: CASH CRUNCH A CONTAGIOUS PHENOMENON AMONG OIL PRODUCING COUNTRIES!
By:
Nurudeen Dauda
May 17, 2016.
nurudeendauda24@yahoo.com
nurudeendauda24@gmail.com
nurudeendauda.blogspot.com
Saudi Arabia is set to secure $10bllion loan from International banks as the Kingdom seeks to address a budget shortfall caused by the fall in oil prices, according to five bankers close to the transaction. Saudi Arabia increased the loan size from an initial target range of between $6billion to $8billion after receiving demand from a wide range of global banks. The world's or OPEC leading oil producer announced a record $98bn budget deficit in 2016 citing rock-bottom global petroleum prices.
The budget deficit is the “highest” in the history of Saudi Arabia, but was not as big as some expected. The International Monetary Fund had projected a deficit of $130bn Saudi Arabia has raised domestic energy prices by as much as 40 percent for fuel and 50% for Gas. Fuel price increase is not only in Nigeria as other oil producing countries: Saudi Arabia has- 40%, Bahrain- 56%, Oman- 33%, Qatar-30%, UAE- 10%, and Venezuela- 6,000% increased. Almost all the oil producing countries are not finding it easy all over the world, but the Nigeria’s case is different or worst because we have a “monoculture economy”, we import almost 100% of our refined petrol until in the last few weeks, we benefited with little or nothing during good crude oil prices . At it “height” crude oil price was above $100 per barrel for four (4) years (2009-2014). Crude oil price at the international market collapsed from $115 per barrel in 2014 to as low as $27 per barrel in January, 2016, about $88 loss per barrel. However, the price is now between $49-$50 per barrel as at yesterday.
Among the participating lenders to Saudi are U.S banks J.P Morgan, Goldman Sachs and Morgan Stanley. Also a strong Asian contingent including bank of Tokyo-Mtsubishi UFJ, Industrial and commercial Bank of China and Mizuho Bank are likely to be contacted. The plan five years loan might mark the country’s return to the global credit markets after a quarter –century. It also comes at a time when the major oil exporters of the Persian Gulf are under pressure to find new sources of capital after their principal source of income dwindled as energy prices started to fall in 2014 from as high as $115 per barrel to $27 per barrel in January,2016.
Saudi Arabia whose credit rating was recently cut by ratings firms Fitch and Standard and Poor’s is not the only country in the region raising fresh funds. Qatar and Oman have already borrowed in recent months, while Abu Dhabi is considering an international bond.
Bahrain witnessed the “first” increase in pump price with 56% in “33years”, in January, 2016. Oman increases pump price with 33% which “first” in “17years” in January, 2016. Venezuela increased pump price with 6,000% the “first” in “22 years” in February, 2016. UAE’s pump price increment was in April, 2016.Qatar in January, 2016.
It is “logical” rather than “ironic” that when fuel prices in the “none” oil producing countries have reduced due to “low” crude oil prices in the “World market” it has on the other hand, increased among the oil producing countries. The logic is that If crude oil price is “high” oil producing countries will have “Surplus incomes” due to “huge receives” while none oil producing countries will have “Deficits” due to paying “huge” prices for crude oil and “vice versa”. While none oil producing countries are “rejoicing” with “low” oil prices the oil producing countries are faced with difficulties. Hey is economics not magic!
May God bless Nigeria!