The Nigeria Extractive Industries Transparency Initiative, NEITI has called on the government to insulate the economy from the perennial oil price volatility by weaning Nigeria off its unhealthy dependence on oil which accounts for the bulk of its revenues and foreign exchange earnings.
NEITI made the call in its latest policy brief, titled: “Insulating Nigeria from Perennial Oil Price Volatility” in which it urged the government to adopt sustainable strategies for robust fiscal cover for the Nigerian economy during periods of cyclical oil price shocks.
NEITI stated that “Price volatility is a constant feature of the oil market, exposing oil-dependent countries like Nigeria to regular economic crises when oil prices tumble”. It noted that though, price slumps have always been accompanied by severe pains that linger beyond the price crash, “The virus will eventually be tamed. Oil prices will go up again. So the pain of the moment shall pass. But the next slump in oil prices is not a matter of if but when”.
The latest NEITI policy brief examined the impact of Covid-19 on the country’s economy, explored inherent dangers in natural resources dependence and recommended ways through which Nigeria can be insulated from this predictable but perennial challenge.
Examining the impacts of Covid-19, the brief noted that the pandemic has put Nigeria’s public finances, and by extension its economy, in dire straits. “The 2019 Coronavirus disease has thrown most countries into the throes of sudden and multiple crises…exposed the inherent economic vulnerabilities of resource-dependent countries like Nigeria…This is largely due to the sudden slump in oil prices, caused by the collapse in oil demand as countries imposed lockdowns in a bid to contain the health crisis”,
On predicaments being faced by resource-dependent , the paper described it as “sequence of delusions, dependencies and distortions. First, the onset of resource windfall creates delusion that the country will continue to be rich from its natural resources. Then overtime, the country becomes dangerously dependent on revenues from mineral resources due to this delusion, and also because resource rents are relatively easier to earn and spend”.
(Editor: Terverr Tyav)
