In what may be a warning on the danger of remaining a mono-product economy, the International Monetary Fund (IMF) has warned that Nigeria’s Excess Crude Account (ECA) could be wiped out in one year, should the price of crude oil fall to $80 per barrel.
The warning was given by Scott Rogers, IMF’s Senior Resident Representative in Nigeria at a press briefing to present highlights of the Staff Report on the soon to be published 2012 Article IV Consultation.
Scott Rogers warned that a decline in international oil prices to $97 (annual average) would begin to erode ECA balances, while a fall to between $80 and $85pb would wipe out ECA balances within a year.
“Declining world oil prices mean lower oil revenue and even with expenditure restraint on the part of the government, “fiscal deficits are projected to re-emerge.
“Lower world oil price means shrinking current account surpluses. Combination of stagnant oil exports and continued growth in imports means smaller current account surpluses. World oil prices are projected to decline, but to remain high by historical standards.”
Nigeria’s oil output has been on the decline in recent times, owing to a combination of theft and leaks, from which the nation is losing about 150,000 bpd, according to Shell.
Scott Rogers, who applauded ongoing efforts to build the nation’s external reserves, while commending the government for rebuilding the country’s fiscal buffers, lamenting that such “are still well below levels at the time of the 2008 crisis. But with capital inflows and outflows broadly in balance, the current account surpluses would permit a rebuilding of international reserves.”
He painted a bright future for the country when he predicted that the nation’s external reserve could swell to $80 billion over the next four years, almost double the current $48.647 billion, according to figures obtained from the website of the Central Bank of Nigeria (CBN) as of May 8, 2013.
“International reserves will continue to rise, buoyed by relatively high interest rates, at least in short-term,” he added.
On Nigeria’s developments and outlook, the IMF chief predicted that “strong growth will continue in non-oil sectors,” noting that tighter fiscal and monetary policies are easing inflationary pressures. According to him, tighter fiscal policy has also helped rebuild the ECA, but balances are well below earlier levels.”
JD:Nigeria’s economic problems is predicated on only one issue,corruption.a country that cannot legitimately account for over 60 percent of its resources and income will never be too far away from problems!