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Daily Independent (Lagos)

Nigeria: Investors Panic As Oil Falls Below $78

Adeola Yusuf

13 October 2008

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Lagos — Nigerian businessmen who operate foreign accounts are worried over the continuous backpedaling of the global financial future even as the crisis over the weekend led to the stunning collapse in oil markets sending a barrel of crude plunging below $78.

Oil has not been this cheap in 13 months and this development has thrown Nigeria and other members of the Organisation of Petroleum Exporting Countries (OPEC)into confusion as oil, "their major source of revenue continues to sink."

OPEC declared over the weekend that it would hold a special meeting on November 18, 2008 to discuss how the crisis is wrecking havoc on oil prices.

The worsening financial crisis, Daily Independent learnt, has also led majority of Nigerian industrialists to panic withdrawal while some of them are still confused on what the future holds for their investments abroad.

"Investors alike have grown more pessimistic about resolving this escalating global economic crisis," a business tycoon who pleaded anonymity said.

"Adrenalin, hormone responsible for apprehension has been secreting in no small measure into our veins and I will not lie to you, this issue may lead to hypertension for many people," he submitted.

Global Investors have shrugged off an array of market-stabilising efforts by world governments, including a $700 billion financial rescue plan by the United States, several bank bailouts and a coordinated interest rate cut by the Federal Reserve and central banks around the globe.

Although crude prices have almost been cut in half since surging to a record near $150 barrel over the summer, energy experts still believe that prices could go even lower.

Friday's steep losses came as Wall Street capped its worst weekly drop ever with another wild session.

The Dow Jones industrial average fell as much as 700 points earlier in the day before gyrating in and out of positive territory and later finishing the day down 128 points.

The frenzied trading weighed heavily on oil markets, sending prices plummeting more than $9 a barrel at one point.

"There is so much fear out there and that's really gripping the oil market. People are just afraid to hold a position so they are closing out and selling off," Michael Lynch, President of Strategic Energy and Economic Research in Winchester, Massachusetts, said.

Light, sweet crude for November delivery ended the day $8.89 lower at $77.70 a barrel on the New York Mercantile Exchange. It was the lowest settlement price for a front-month crude contract since September 10, 2007.

"As long as this financial crisis continues, we could see prices go down into the $60 range," Lynch added.

Oil has now lost 47 percent of its value since hitting a record $147.27 on July 11 as a deepening credit crisis sparked by the sub-prime mortgage collapse wreaks havoc around the globe and drives down energy demand.

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