Nigeria has raised alarm over decline in global crude oil prices, but said measures have been put in place to cushion the effect of the dip on the country’s economy.
“Nigeria has two to three months of rainy day savings to cushion it while contingencies are put in place should world oil prices continue to fall,” Ngozi Okonjo-Iweala, the country’s Finance Minister told Financial Times.
According to her, should the oil price fall below the current $78 benchmark used in planning the 2015 budget, Nigeria will have to fall back on the Excess Crude Account.
She however explained that the account will not be the first point of call if the price goes below $78, as the country can still survive the first two to three months. “That is the time needed to get other measures in place.”
The minister admitted that Nigeria, this time, had slimmer buffers, with only $4 billion in the ECA, as against International Monetary Fund’s recommended $6 billion.
The country, which became Africa’s largest economy following the rebasing of its economy earlier in the year rely on oil for 80 percent of its earnings. A fall in the price of oil on the international market therefore puts its economy at risk.
One of the World’s leading investment banks, Goldman Sachs predicts that oil price will fall to $70 per barrel in 2015, a prediction that raises more fears about Nigeria’s economic outlook in 2015.
According to the lender, the boom in shale oil meant the world is now producing more than it needs. With more discoveries across the globe, the situation may not get any better.
Okonjo-Iweala therefore agreed it was high time Nigeria focused on boosting its non-oil revenue.
The country has hired global consulting firm McKinsey for a review of revenue services in the country as it seeks to diversify its economy.