Nigeria Concerned About Continued Fall in Oil Prices
As oil prices fall dangerously close to below $80, the Minister for the Economy and Minister of Finance, Ngozi Okonjo-Iweala has disclosed in an interview that Nigeria could have only a two or three-month cushion should oil prices continue to fall. She said the government was putting in place stricter measures that will soften the impact on the economy of the drop in prices. The level at which the government will have to raid its Excess Crude Account (ECA), its last resort, is $78. That stage is not far off, as prices look likely to continue to fall.
Speaking to the Financial Times, Okonjo-Iweala said that the intention is not to raid the ECA. The 2 or 3-month buffer, she said, will be enough to put contingency measures in place to avert a hard landing. The ECA is already depleted and at $4 billion is some $2 billion less than the amount recommended by the International Monetary Fund.
On another note, Okonjo-Iweala was hopeful that the tighter prices would encourage the government to get a grip on oil theft. In addition, she believes that now, more than ever, there is a strong incentive to pass the Petroleum Industry Bill, which could drive investment in the industry and increase production.
She said the country would have to diversify and increase its non-oil revenue in the face of falling oil prices. Elaborating on the key non-oil revenues that the government would target, she said at a press briefing in Abuja that the government would increase revenue targets for the Federal Inland Revenue Service and the Nigeria Customs Service. This was part of the contingency plan that the government has come up with to help cushion the effects of falling prices.
The Minister said: “The global economy is volatile, oil prices are falling and as a matter of priority, we are developing a contingency plan to bring stability to the economy.”