The current upsurge in global Oil price across the globe, specifically among oil producing nations, has undoubtedly signalled a relief to Federal Government and Central Bank of Nigeria (CBN).
Nigeria, which happens to be Africa’s largest producer and the world’s sixth largest oil producer and exporter, can at least breathe a new air since it’s operating a mono-economy despite numerous natural resources.
For several years, the global oil market had seen balanced activities, however, sometimes in June 2014; the Organization of Petroleum Exporting Countries (OPEC) announced a plunge in the price of global oil, which was an offshoot of United States of America production of Shale Oil, and rickety demand from Europe and China, Middle-east violence that threatened to disrupt supplies.
This has left nations like Nigeria standing on thin ice, as its biggest importer, United States of America discovered and began to explore Shale oil and gas, causing lackluster demand and excess supply in the global market.
For a country like Nigeria that generates over 85 per cent of its revenue from sales of oil, the slide, has hit various aspects of the economy.
The Naira has been devaluated more than once pre and post 2015 general elections and External Reserves continued to depreciate drastically.
With the protracted slide in the global price of oil, the CBN has found itself in an uncomfortable position devaluing the naira against the dollar in an attempt to shield the economy from the effect of the massive shake-up.
Federal monthly allocation funds dropped, leading to several state inability to pay salaries.
President Muhammadu Buhari had to bail out some states with funds from the Excess Crude Account to augment shortfalls from the federal allocations, will be nowhere in sight.
In addition, this inflicts untold hardship on many Nigerians working in the public service as some of these workers were fed by some notable churches and rich politicians.
Before the election, the government using the 2014 budget rolled out series of projects that were eventfully dead, following unavailability of funds in the federal government’s coffers to execute the projects.
Banks have suffered huge losses in profitability and share values as most of them were exposed to the Oil & gas sector.
Investors’ apathy in the capital market reduced, as foreign investors that contributed over 60 per cent investment dashed out to safety to avoid the anticipated devaluation of the local currency, which eventually occurred.
This has led to a dismal atmosphere in the capital market, exposing the failure of Nigeria’s economic managers to diversify away from oil revenues during the boom times.
Major International Oil and Gas (IOC) companies cut project and jobs in the oil & gas with large sums of money, which might eventually go to waste following the supply glut and dreary oil demand across the globe.
Although the protracted fall in the global price of crude has caused major harm to the nation’s economy, it might signal a new era for subsidized prices of fuel and other petroleum products as confirmed by the move of the Federal government on reducing the pump price of fuel from N97 to N86.50/ litre.
However, if there is steady price of global oil on the global front, it delights the Federal Government as it has surpassed $38 budgetary benchmark, trading at $42.02 per barrels, the price of OPEC basket of 13 crudes last Thursday.
Will President Buhari led administration create employment? Was there relief in foreign exchange market during the $100 per barrels? Has the electorate for once benefited from the excess crude accounts or has productivity improved?
With the steady rise, the Federal Government should exercise caution and be frugal with the revenue accruing from the rise in oil price, so as to steer the country from the current economic downturn.
The government must start a decisive action at plugging loopholes in the Oil & Sector and concentrate on how to support the real sector of the economy.
The excess from the oil boom must be channelled to economic diversification to such areas as agriculture, solid minerals and manufacturing, job creation and infrastructure development across the 36 states most especially states that are producing the oil.