The International Monetary Fund (IMF) has said that the present slide in the price of Nigeria’s crude oil will continue for the next five years as oil prices continue to slump in the global market.
IMF Managing Director, Ms. Christine Largarde, on an official visit to Nigeria, said last week in Abuja that Nigeria should brace up for tough years as oil prices further take a nose-dive.
While acknowledging some significant achievements Nigeria had made since her last visit in 2011, Ms. Largarde told President Muhammadu Buhari that the situation in the global oil sector had confirmed fears previously expressed by the IMF that the prices of crude oil will remain low for a long time.
She said the major implication of the low global oil prices on Nigeria would be the non-availability of funds to meet basic needs of Nigerians and also to provide critical infrastructure for the country.
Largarde said: “The move by the government to remove the fuel subsidy is good. Those people who need the subsidy can receive cash transfer. Fuel subsidies are hard to defend. Subsidies are no longer good. But I hear that it will hurt the poor. Forty percent of fuel subsidies in rich countries go to rich families. The people do not really need the subsidy. Look at the number of people who queue up at stations to buy fuel.
“There is a small acceleration expected in 2016. Growth in the last 10 years has slowed down in sub-Saharan African countries. Oil prices will remain low and low for a long time Oil-producing countries must factor this in and model their economic policies towards this direction. Nigeria is facing mounting pressure. There will continue to be abundant supply of oil but low demands. It is very unlikely that we will any rise in price anytime soon.
“Private sector investments will be affected. Higher interest rate will continue to rise. Sub-Saharan African countries are facing immense pressure as a result of this. I can feel the hardship and pains as a result of activities of Boko Haram. The resources spent in trying to fight insurgency are supposed to be spent on infrastructure.”
“Whatever happens in Nigeria will affect her neighbours because of the trading relationship. There must be a fundamental change in the way government operates. It is not about how to divide proceeds from oil wealth. It is about how to deliver to Nigerians the basic services they deserve. Hard decisions must be made. As the National Assembly considers the 2016 budget, these are the issues they consider,” Largarde intoned.
Although the IMF boss was careful not to openly endorse the de-valuation of the Naira, she however, admonished the government to adopt a flexible monetary policy that would better serve the interest of Nigerians.
She told President Buhari to ensure that Nigeria built and sustained a positive regional co-operation among West African countries adding, “whatever affects Nigeria directly or indirectly affects other countries within the sub-region.”
According to her: “This is always a moment I cherish. My first visit to Nigeria was in late 2011. At that time, Nigeria was emerging from the global economic crisis. Nigeria is the prime destination in Africa. Nigeria has gone through democratic transition which is a good thing. When investors know that transitions can happen successfully, they have more confidence.”