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Drop in Oil Price – What is the Hope of Nigeria?

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The Federal Government of Nigeria has revealed its plans to cut budget, which was initially prepared with a $57 per barrel oil price projection. The refusal of the Organization of the Petroleum Exporting Countries (OPEC) to cut production in early march has led to the drop in Oil price. The Brent crude price of $34.11 per barrel as of today had dropped as low as $23 per barrel in March. It had been fluctuating since OPEC rules were defied and Russia as well as Saudi Arabia scaled up their production and export capacity.

 The increase in product availability which has risen far above demand, especially as the world battles with the Economic impact of the corona virus has led to a free fall. Nigeria is anticipating reviewing the budget with a new projected price of about $30 per barrel. The stability of this price is still faced with circumstances beyond control.

President Donald Trump of the United States who spoke with his friend, the Crown Prince of Saudi Arabia claimed there are plans to review the production and cut it down to 10 Million Barrels to help minimize losses of Oil companies and Oil dependent Nations like Nigeria. The new decision was to be taken during an E-Meeting with President of Russia and others. Things however didn’t go well as plans to have a successful meeting has suffered set back.

Nigeria’s Finance Minister, Zainab Ahmed on Monday said; Nigeria, Africa’s top oil producer, will cut the size of its record 10.6 trillion naira ($34.6 billion) budget for 2020 because of a sharp decline in the price of crude.

I would be part of a committee, also including the minister of state for petroleum, the head of state oil company NNPC and the Central bank governor, that would determine the size of the budget cut in the coming days. She said.

She revealed this information to reporters at the presidential office in the FCT, Abuja, after a meeting with President Muhammadu Buhari.

In 2016, Ibe Kachikwu, who was Minister of State Petroleum Resources and former Group Managing Director, Nigerian National Petroleum Corporation (NNPC) said Nigeria’s problem was caused by refusing to diversify its natural resources base for a useful result.

According to him, the country’s economy would attain a great height of development if the economy was diversified and the mono-product economy practice was jettisoned.

This was enclosed in a presentation paper titled“ Structures and Processes of Nigeria Mono Economy” unveiled at the 9th Annual Forum of Laureates of the Nigerian National order of merit (NNOM).

Nigeria is yet to recover from the 2016 recession, which was caused by collapse of Oil Price in late 2014. This should have been a wakeup call to diversify and move from depending primarily on Oil to mineral and agricultural resources which are in abundance in the country.

Having mineral resources such as Bitumen, Coal, Oil & gas, Gold, Iron, Lead & zinc, Salt and Tin spread across the different zones of Nigeria, it will be very imperative to take up an urgent responsibility of exploration and review the possibilities around these resources to save the situation of a threatened economy of Nigeria, The giant of Africa.

Agricultural resources in Nigeria which includes Cocoa, Coffee, Cotton Groundnut, Kola nut,  Palm Oil, Plantain,  Sugarcane and Timber should also be given more attention as they could increase Nigeria’s GDP by increased export.

Strategic implementation of restructuring and zoning the management of Nigeria’s Natural resources may be the Hope of the nation. Creating an atmosphere of reward oriented governance will help governors and leaders across the geopolitical zones to sit up, think right and act right.

The Climate change nightmare and unending advocacy for reducing emission of greenhouse gases is forcing intercontinental implementation of regulatory policies to checkmate systems that pollute the air. This means more cars will be developed that consume less fuel and use more electrical systems. More generators will be produced that are dependent on solar and battery consumption rather than fuel. The need for reducing fuel consumption has also become a necessity to save the decay in the Ecosystem. The call to diversify the economy is not just going to be a result oriented decision in view of the developments on ground with OPEC group but it is the way forward considering the drop in the use of fossil fuel.

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