FROM a peak $142 per barrel earlier in the year, the international price of oil, Nigeria’s major export product and revenue earner, has come down from $100 per barrel to $90 per barrel.
This significant fall in price has been a major source of concern to government, the Economic Management Team, local and foreign investors and stakeholders in the nation’s economy.
The real fear, however, is that the worst may not have happened, especially with forcasts that the price could further crash below $72 per barrel, the benchmark upon which the country’s 2012 budget is based.
This is where the nation appear to be losing sleep and government’s economic managers are sweating to devise means to get around the situation should the worst happen. Minister of Finance and co-ordinating minister of the economy, Dr. (Mrs.) Ngozi Okonjo-Iweala, has already warned that although the country cannot be said to be broke, the time has come for a stricter management of the economy and to save for the proverbial rainy day.
Since 1973, crude oil has constituted a disproportionate size of the nation’s foreign exchange earnings amidst the huge revenue potentials of other sectors such as agriculture and solid minerals.
Now, with the economic crisis in several European countries, including three of the largest four; Portugal, Spain and Italy, the warning that an economic dislocation in these countries may grossly affect others, particularly those dependent on them is fast becoming a reality and a stark one for that matter. The situation may impart precariously on the nation’s capacity to fund its budget.
The Organisation of Petroleum Exporting Countries(OPEC) had exerted enormous influences on the international going price of the product in favour of the cartel’s members but the present development has shown the extent the organization can go in intervening for its member-nations.
Although it sold for $142 per barrel at the beginning of the year, crude oil, no doubt, a critical catalyst for economic boom, is also proving that it can be the undoing of countries solely dependent on it.
Today, the reality of the country losing the substantial revenue from oil is staring the nation in the office. One of the first casualties may be the 2012 budget, the implementation of which is feared to be currently just below 20 per cent. Also, with the monthly revenue allocation coming largely from crude oil proceeds, the debilitating impact of dwindling revenue may be felt across the country unless states begin to rise to the occassion by stepping up their Internally Generated Revenue (IGR) and diversifying their economies to alternative sources of revenue. An example of this is the effort by the Uduaghan administration in Delta State to build an economy without oil and intensify the war against tax defaulters.
Experts are of the view that the only way out of the impending economic gloom lies in urgent diversification of the economy, beefing up of external reserves, exports, trade regulation, fiscal discipline and elimination of wastages in governance.
Economic planning based on a single product is considered bad economics and may make sustanable development impossible. Therefore, the time to start looking at opportunities that exist outside crude oil is now.