Why the oil prices crash may cause another economic hardship in Nigeria
The global oil prices crashed on Monday, March 9, sending shockwaves across many oil-producing countries. Nigeria whose revenues largely depend on oil exports is one of the countries that might come under economic hardship due to the falling prices.
The slump in the price is coming after Saudi Arabia launched a price war with Russia over a disagreement on cutting down oil production to meet the slow demands of oil following the Coronavirus outbreak.
This forced the International benchmark, Brent crude to plummet by 30 percent to $32.05 per barrel, before stabilizing at $36 per barrel as at Tuesday evening.
When President Buhari signed the 2020 budget in December 2019, Nigeria’s Brent crude was well above $60 per barrel. But, with the new oil price falling way below the $57 benchmark used in fixing the N10.59 trillion 2020 budget, many experts warn of an impending economic crisis.
The last time the oil price crashed to as low as $27 per barrel in 2016, it battered the Nigerian economy and threw the country into recession. The hardships from the recession are still fresh in the minds of many Nigerians today.
Barely three years after the end of the recession, the country is still struggling to meet its financial obligations. And if the government does not find alternative means to cushion the impact of the low oil price, there are fears that the country might be heading into hard times.
Expressing uncertainty over the impact of the low oil prices, the Minister of Finance, Budget and Planning, Zainab Ahmed said the government was deeply concerned.
“It is very clear that we will have to revisit the crude oil benchmark price that we have of $57 per barrel. We have to revisit it and lower the price,” she said.
The federal government has set up a budget review committee to find ways it can salvage the situation before it spirals out of control.
