Nigeria will be doomed if oil prices continue to fall

The collapse of international oil prices should be a major cause of concern for Nigeria, the 6th largest oil producing state in the Organization of Petroleum Exporting Countries (OPEC). This is the assessment of experts in the international oil/petroleum industry, simply because Nigeria is heavily reliant on exports of the commodity extracted from the country’s Niger Delta region by oil major, Shell Petroleum Development Company of Nigeria (SHELL) and other oil producing companies, in addition to off-shore drilling within its territorial Atlantic Ocean by American oil major, ExxonMobil .

For Nigeria, it could be a matter of avoiding a severe recession, with skyrocketing local food prices, lack of adequate circulatory spendable money/cash in the huge economy, which was recently rebased, thus surpassing South Africa as the largest economy in Africa. The falling oil prices have a great potential of also hampering President Goodluck Jonathan’s defense spending, his ‘Transformation Agenda’ initiatives, especially in the power sector, agricultural sector and other critical sectors of the fractured economy, even as the country gears up for its 2015 general elections.

Recently, the Nigerian government budgeted N1.22 trillion for subsidies in 2015. This laudable effort to make the peoples’ requirements available, ameliorate and cushion effects of inflation etc. (from the government’s point of view) may have to be readjusted for more practical fiscal control measures. It’s been a common practice, more of a norm rather than the exception, for all the 36 state commissioners of finance to gather individually and severally (going to Abuja, the capital) to process and collect monthly allocated funds from the national treasury for their individual states.

These state allocated funds are largely unaccounted for by the state governors who spend the public funds in projects of their choice, many to expenditures supposedly yielding the so-called ‘dividends of democracy’ without any inkling of democratic purpose or disposition to poverty alleviation in their impoverished states – while the 36 docile and loyal state lawmakers, who should be watchdogs of accountability and transparency, look on in acquiescence while many state treasuries are looted with impunity

Experts say that for governments in oil-exporting countries to meet their spending commitments they need oil to remain above a certain price. With oil prices under $87 a barrel, countries that rely on high oil prices, including Nigeria, Venezuela, Russia, and Saudi Arabia, may have a reason to be concerned.

According to a BUSINESS INSIDER report, this chart shows the price per barrel that the six most exposed countries need to meet their national budgets.Tomas Hirst reminds all who care to listen that the price of oil on Friday is a piffling $87: