As oil prices fall to their lowest in decades, Nigeria’s oil revenue has plummeted nearly $2 billion since the start of 2014. While Africa’s most populous nation has continued to sell roughly 1 million barrels of crude oil per day, it has struggled to achieve a robust price. Brent crude—the benchmark against which Nigerian oil is priced—traded last week below $35 a barrel, the lowest price in more than a decade and considerably down from the $100 or higher that oil commanded between 2011 and 2014.
“Nigeria’s oil revenue crunch,” a new issue brief by Aaron Sayne and Atlantic Council Africa Center Senior Fellow Aubrey Hruby, examines the impact of falling oil prices and increased competition on the economy and stability in Nigeria.
Nigeria’s stability depends upon the government’s ability to achieve sustainable economic growth, create robust investor confidence, and build stronger institutional capacity to deliver critical services to the rapidly expanding population.
The country is unlikely to recapture the high oil revenues of the past decade, and now needs to do everything possible to maximize remaining revenues by cutting corruption and increasing efficiency in the oil sector. Most importantly, though, Nigeria must rapidly improve growth in the non-oil sectors that have so far kept the economy out of recession. These sectors are the unsung heroes of Nigeria’s economic story.
Hailed as a milestone for African democracy, the election of and subsequent peaceful transition of the presidency to Muhammadu Buhari generated significant domestic and international goodwill for Nigeria. Fast-tracking key reforms to both the oil and non-oil sectors will help leverage this political capital into sustained economic growth.
Key recommendations include:
- Restructure the state-owned Nigerian National Petroleum Corporation to increase revenue and accountability after a comprehensive performance audit;
- Complement structural reforms with greater official accountability by empowering oversight institutions and sanctioning past malfeasance;
- Develop new markets for Nigerian oil, including domestically, by decreasing reliance on private commodities traders and lifting barriers to domestic crude oil refining;
- Promote non-oil export sectors by focusing political will and resources on valuable agricultural products including cocoa, cassava, and dairy;
- Bank the “unbanked” and energize Nigeria’s underperforming financial sector through promotion of the Nigerian mortgage market, credit card usage, and mobile money.