Since I looked at this issue the first time, crude oil prices have remained down. As discussed in the IMF and World Bank seminar debate, the severe and swift decline in oil and other commodity prices has had varying impacts and extensive implications for oil importers, exporters, consumers and governments. The highly variable effects of the oil-price drop have created some winners and losers. The economies that have been hit the hardest appear to be some of the biggest oil exporters such as Russia and OPEC countries, nations that are heavily reliant on oil revenues to fund their government expenditures. In countries like Nigeria, the whole economy has been terribly impacted since crude oil exports account for about 95 percent of the nationâ€™s foreign exchange earnings. And without diversification the Nigerian economy has not been able to produce much of its importables and therefore will continue to be buffeted by activities in the crude oil industry. For Nigeria, an immediate relief from economic turmoil at this time without much cost will come from a steady rise of oil prices. There is no other easy solution. The only other short term option to save the economy now is for the government to borrow even though Nigeriaâ€™s debt services such a percent of revenue is high. Nigeriaâ€™s total debt as a percent of GDP around 13 percent is low, but it is unimportant. What is important is the nationâ€™s debt service as a percent of revenue. For Nigeria, at over 30%, this is high and will continue as a problem so long as oil prices stay historically low. So when will all this end? It will end when oil prices rise again. And let me tell you, even Nostradamus might not have been able to know the answer to this. I once did currency forecasting for a living. So what do I see for the Naira? That discussion is too long for this segment. But as far as oil prices are concerned, I believe there will start to be a tick up when a couple of things begin to happen. 1. OPEC members stop worrying about market share and start focusing more on prices. 2. The US dollar eases a bit from being too strong and 3. the industrialized economies of Europe, North America and even China begin to regain good health. When you see these things happening then it means oil price increases are ready to follow. Before then, as we insist here at the EBS, build the economies of your communities and the national economy will be diversified. With that who needs much crude? I am Magnus Kpakol and that's my view.
Posted: Feb 11th, 2016 @ 08:47:23 AM