The Oil Business Nigeria’s Blessing & Dependency
Can Africa’s largest economy sink to dangerous lows following the recent rapid drop in the World Oil prices?
Nigeria is a an Oil rich nation, a situation which has propelled it to the top of Africa’s rapidly growing economies as a rising star, but almost every part of this successful structure can be attributed to the Oil businesses. The current situation is now showing how this ‘Black gold’ can also become Nigeria’s worst nightmare. Celebrated by many yet shared by few, Oil is a serious issue.
Few know that 15 years ago Nigeria was selling Oil at a low $10 per barrel which had risen to a high of $120 at its height. This Oil source has sustained Nigeria’s economy by contributing an astounding 70% of all revenue that Nigeria generates.
The latter situation has to change, because the Oil fuels greed, dependency and mismanagement.
Nigeria’s currently possesses an economy generating a staggering $521.8 billion. But as Nigeria prepares for elections in February, the rapidly falling oil prices are causing serious concern to Nigeria’s government at a time when it faces a serious security threat from Boko Haram along with other potential threats around the country. Nigerian Finance Minister Ngozi Okonjo-Iweala, a former vice president at the World Bank, commented oil price decreases are “a serious challenge” for the economy and announced news of a series of government cutbacks in spending.
Some may call this an oversight but the government has resorted to recalculating its budget twice in recent months! The latter was based on an initial forecast based on the price of oil per barrel being $78 a barrel and later down further to $65 a barrel, the latter sent a shock wave through the economy and especially the naira.
The Oil prices have affected other key areas of finance, with the Central Bank forced to devalue the Naira and raise interest rates to protect the country government spending has been hit. 80% of Government revenue is sourced via Oil therefore areas such as Security, prevention of bunkering, infrastructure projects and education could all face reductions. Recently for example the House had assigned 1 billion dollars to Goodluck Johnathan to combat bunkering, an area that swallows up to 2 billion dollars per a year and over 300,000 barrels daily.
The Oil prices will surely rise again because the world is dependent on Oil. Fracking for oil and the discovery of new western oil deposits especially in America has for the moment resulted in a surplus. Therefore it has been harder to maintain high prices and OPEC has recognised this. The question is what will Nigeria have learnt and how will the current elections fair.
The revenue from Oil should be re-invested within other businesses and trades that can sustain Nigeria and create jobs, essential infrastructure targets and therefore budgets should be pre-planned and delivered for example Africa’s fastest growing economy still cannot generate enough power for its people.
We advise the business community both in Nigeria and abroad that as they vote and look on, what do they want to see in Nigeria over the next precedential term?