With the continuous fall in the global prices of oil, and the sharp decline in demand for the country’s mainstay, Nigeria’s oil exports have been predicted to fall further by $26bn.
Crude oil, since discovery, has been Nigeria’s major source of revenue and basis of assumption for the predication of the country’s national budgets. This has put implementation of budgets at the whims of international oil prices, production, output and the Organisation of Petroleum Exporting Countries and their allies.
Global oil demand is on a sloppy slide, leading to ridiculously discounted prices arising from travel restrictions due to containment efforts and decline in industrial activities.
While discussing the impact of the coronavirus pandemic on Nigeria, the International Monetary Fund mission chief for Nigeria, Amine Mati, stated that the country’s crude oil proceeds would contract by 3.4 per cent.
According to Mati, Nigeria’s baseline scenario is uncertain and subject to heightened risks, which are mostly linked to the continuous sharp fall in oil proceeds due to persistent low prices, depressed global demand and declining production in response to OPEC cuts.
Mati said, “The sharp fall in international oil prices, together with reduced global demand for oil, is worsening the country’s fiscal and external positions. The country’s oil exports are expected to fall by more than $26bn. The economy – which remains highly reliant on foreign exchange proceeds and the recycling of petrodollars – is expected to contract by 3.4 per cent in 2020, a six-percentage point drop compared to pre-COVID-19 projections.
The IMF chief also believed that as a result of the decline in oil revenues, economic activities would further deplete, resulting in large fiscal and financing gaps.
IMF’s Executive Board recently approved a $3.4bn emergency financing package to Nigeria, to help with the balance of payments challenges.
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