Expert advises Nigeria on what to do now that oil prices have tanked

The Chief Executive Officer of Shoreline Group, Kola Karim, has urged the Nigerian Government to start paying more attention to the country’s abundant gas reserves, following the recent crash in global crude oil price.

Karim disclosed this yesterday when he appeared on CNBC Africa’s Power Lunch West Africa TV show to discuss how Nigeria and other top African crude producers can stay ahead, in view of the unfavourable oil price regime.

According to him, Nigeria’s abundant gas reserves would have been a “natural hedge” to take care of price fluctuations that have recently been witnessed in the international oil market. He said:

“We need to focus on our gas sector. The gas sector, today, would be a natural hedge to resist price fluctuation. Yes, even if we do not have the flexibility in our production profiling like Russia and Saudi Arabia if we are producing a lot of gas and exporting gas into neighbouring countries, that’s a dollar-earning position that will help support our natural position.”

He went further to explain that Nigeria really needs to act swiftly because the country has now found itself in a precarious position due to the current realities in the global oil market. According to him, never before has the world’s oil producers faced this type of uncertainty. According to him:

“Look, the world is facing a mega situation. It’s never been seen before. On the demand side, you have the biggest consumer – China, that has contracted and continues to contract because of the Coronavirus. Then on the other side of supply, you’ve got Saudi Arabia, a major producer. You’ve also got Russia, a major producer that is not OPEC and is refusing to work in concert with OPEC to stabilise oil prices. And then you’ve got America on the other side, the shell producers who have not relented in their production. 

“So, you have a big problem. When you have not two elephants fight – you have three elephants fighting. You know what is going to suffer? Countries like Nigeria the smaller producers, because our budget is based solely on the foreign exchange income from oil.”

Nigeria's crude oil production, Crude Oil: Nigeria's volatile oil sector and economic progress   

Already, the Nigerian Government is taking steps to scale down on the country’s N10.6 trillion 2020 budget, in response to the dramatic crash in global oil prices.

Reuters had quoted the country’s Finance Minister, Mrs Zainab Ahmed, as saying that talks had begun with the country’s President to this effect.

According to the Minister, “there will be reduced revenue on the budget and it will mean cutting the size of the budget.” Nigeria had based its ambitious 2020 budget upon an oil price of $57 per barrel. Unfortunately, Brent Crude, the global oil benchmark, has crashed down to $37.29 per barrel, according to latest trading figures provided by Oilprice.com.

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