As Iran Crude Oil moves into the market: What is the fate of Nigeria Economy
As Iran Crude Oil moves into the global market: What is the fate of Nigeria Economy?, United State and European Union sanctions on Tehran
were finally lifted on Saturday, Which makes the Iranian economy $150 billion
richer. Iran has been gearing up for this moment for months and could soon
return to the top ranks of global oil producers. We could remember that Iran
has been under sanction since 2013 from US & EU following their connection
with building of uranium used in making of nuclear bomb.
However
the price of crude oil has been quite unfavorable in the global market for
months now, dropping to below $30 a barrel. There
is no doubt that a flood of new oil from Iran will likely push them even lower in
no distance time. According to Brenda Shaffer, a professor at Georgetown
University in Washington, D.C. "Iran is able quickly to pull oil out of
storage and from tankers floating at sea ... which it has an interest to do
soon, since it is paying to store that oil,”. Iran’s oil minister Bijan
Zanganeh is of the opinion that the country is aiming to increase output by
close to 1.5 million barrels by the end of 2016, taking daily production to 4.2
million.
Iran no doubt is a big member of the
oil cartel OPEC and following some recent diplomatic tensions between Iran and
Saudi Arabia; John Defterios and Mark Thompson is of the view that the
situation might get more complicated. As Saudi Arabia, the de-facto OPEC leader
is already struggling to keep its market share (by discounting the price of
their crude oil to US) and Iran's ambitions coupled with their comparative advantage
could put it under even more pressure.
The question now is, where does
Nigeria and her economy stand in the mix of all these dilemma?; the proposal of N6.08trillion 2016 Budget by the Nigerian
Government has generated divergent views among economic experts in the country.
The budget which was based on a crude oil benchmark price of $38 per barrel and
a production estimate of 2.2 million barrels per day for 2016. Nigeria in no doubt
operates a mono-product economy and going by the state of infrastructures in the
country many were of the view that N6 trillion will make little or no
significant impact in the economy if nothing is being done to ameliorate the
issue. Again the Nigeria exchange rate has been quite unfavorable in the global
market following the depreciation of naira to the tune of N282 to a dollar in
the parallel market last week.The
Central bank of Nigeria in a recent measure lifted the ban on dollar deposit into
commercial bank in order to ease trade and banned the sale of dollar to Bureau
de Change operators which they believe had abandoned the original objective
leading to their establishment, which was to serve retail end users who need
$5,000 or less.
Mr.
Shehu Mallam, (National President, Constance Shareholders Association of
Nigeria) through his interview with Sunday Vanguard suggested that “For the
economy to record tangible growth, government must embark on appropriate diversification.
They should develop our infrastructure to maintain the diversification process.
Also, government should give people proper orientation on the type of
diversification they want to do. Creating jobs for the citizens should be given
needed attention. The financial system must be strengthened to ensure
prudent utilization of public funds. Without these things in place, no amount
of money would keep the economy on the path of sustainable growth”. In summary I
think Nigeria economy should prepare for the worst time because there are speculations
that crude oil price could drop to $20 per barrel. Kindly share your view with us.
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