…releases Policy Brief on oil price volatility
The Nigeria Extractive Industries Transparency Initiative (NEITI) has commended federal governments’ Economic Sustainability Plan (ESP) for the country geared towards mitigating the negative impact of the CIVD 19 pandemic.
NEITI made the commendation in its latest policy brief, titled: “Insulating Nigeria from Perennial Oil Price Volatility”.
The report pointed out that the outbreak of COVID 19 pandemic has put Nigeria’s public finances and by extension its economy, in terrible shape, more than the country could have envisaged.
The report described as laudable, the measures already put in place by the federal government to mitigate the impacts of the pandemic on citizens.
“The 2020 Budget has been revised, with cuts in capital and recurrent expenditures and fresh allocations aimed at containing the pandemic and boosting economic activities. Revenue projections and oil price and production benchmarks have been slashed. The country has taken a $3.4 billion emergency facility from the International Monetary Fund (IMF) and is withdrawing $150m from the stabilization fund of the Nigerian Sovereign Investment Authority (NSIA)”, the report stated.
Other laudable economic measures according to the policy brief include removal of subsidy on petroleum product, adjustment of exchange rate from N305/$1 to N360/N1, and approval of N2.3 trillion Economic Sustainability Plan..”.
NEITI maintained that these measures are necessary and commendable steps, which should help in minimizing the economic impacts of the immediate crisis, but stated the need to look beyond surviving the latest episode of a lingering malaise.
NEITI however noted that it is important to use the crisis to significantly reduce Nigeria’s vulnerability to oil price shocks and put in place a framework for robust fiscal cover. “As oil prices are gradually rising up again in recent months, sharing an increase of 114% from $18.38per barrel to $39.42 per barrel, this should not create a dependence and a distortion that always make Nigeria vulnerable to fall in prices that it has little or no control over”, the brief read.
“Whether oil prices recover quickly or slowly, the next oil price crash is a matter of when, not if and therefore the time for the country to prepare is now”, NEITI policy brief concluded.