Economists have advised the Federal Government of Nigeria to take advantage of rising crude oil price in the international market to grow the economy..
The experts on Monday in Abuja, also said that the measure would strengthen the Naira
Price of crude oil, the country’s main revenue generating resource, had been on the increase due to tension generated by the Russian-Ukrainian conflict peaking at 103 dollars per barrel.
Minister of State for Petroleum Resources, Timipre Sylva, had recently said that the increase in prices of crude oil was not in the best interest of Nigeria.
Sylva said that Nigeria would be comfortable with prices ranging between 70 dollars and 80 dollars per barrel.
According to him, the inability of Nigeria to activate the oil wells it shut down when OPEC instructed producing countries to cut production as well as the lack of investment in the upstream sector are affecting the nation.
The Chief Executive Officer, Centre for the Promotion of Private Enterprise, Dr Muda Yusuf, said rather than a blessing, the rising global crude oil price could be a challenge for the economy.
“The development will naturally translate to more foreign exchange and revenue earnings for the country, more profits for the oil companies operating in Nigeria and for other stakeholders in the oil sector.
“But the rising oil price cannot be celebrated by Nigeria because it “penalises’’ the Nigerian economy and this is a paradox.
“The implication of this rise in oil price is that our import bill for petroleum products is going to go up, the subsidy payment on petrol is going to increase.
“If this trend continues this way in another six months, Nigeria should be looking at a subsidy cost of about N5 trillion or more,” he said.
Analysts at Cowry Asset Management Limited, a leading investment house, said they were concerned that Nigeria would not optimally benefit from any ensuing rise in crude oil prices due to its suboptimal crude oil production.
According to the analysts, this will increase pressure on the external reserves as well as exchange rates as oil revenues will struggle to meet higher cost of imported refined products in addition to other imports.
Analysts at Cordros Capital said the position of Russia as a global power could cause major dislocations across the world, with “more riveting implications’’ for susceptible economies like Nigeria.
An economist, Tunde Adewale, recalled that past increases in the price of crude oil had not been beneficial to the Nigerian economy, adding that the present one may not be an exception.
“The differential in price between the Nigerian petrol and that of other countries will increase significantly, thereby, necessitating an increased smuggling because of the higher profit margin.
“If smuggling increases, the amount of petrol that we claim to be consuming locally will also increase because of the relative price and the wide margin,” he said.
A Chattered Accountant, Ibrahim Ahmed urged the Federal Government to take concrete steps and ensure judicious and impactful use of increased revenue from rising crude oil price in the interest of the masses.
“Government has been telling us since 2015, that the fall in the price of crude oil created a revenue challenge that affected its performance.
“Now that crude oil is selling for above 100 dollars per barrel, there should be no further excuses.
“Nigerians expect a drastic reduction in borrowings to fund government projects, as well as strengthen value of the Naira,’’ he said.