Economic expert says decline in oil price will affect naira appreciation
Rewane, Managing Director, Financial Derivatives Ltd said instability in the price of oil at international market might further put pressure on Nigeria economy and depreciate the Naira.
He said this at a lecture organised by International Chamber of Commerce Nigeria (ICCN) to mark its Annual General Meeting in Lagos. ‘‘The global price of oil will have adverse effect on the Nigerian economy because of our over-reliance on crude oil. Every one dollar drop in the price of oil will amount to a dollar drop in our external reserve. It will depreciate our exchange rate,’’ he said.
Rewane said that Nigeria was currently producing less than the needed quantity of oil that could sustain the economy. ‘‘Our current oil production is too low. For Nigeria to meet her expected budgetary revenue, we should be producing four million barrel of oil per day,’’ he said.
The economist said that Nigerian economy was relatively stable as a GDP of 265.8 billion dollars was recorded in the first half of 2012 as against 265 billion dollars recorded in 2011. He said that the unchecked recurrent expenditure and wasteful spending could create a downward trend in the economy.
Rewane said that the total removal of oil subsidy should not result in increase in the pump price of petrol. ‘‘Oil price was 130 dollars per barrel when oil subsidy was partially removed in January. The price is a little below 100 dollars per barrel today. A total removal of oil subsidy should cause a decrease in pump price by at least N3. It should not increase it,’’ Rewane said.
He said that the removal of oil subsidy, if properly implemented, would further stabilise the Nigerian economy. ‘‘The oil subsidy has created a big strain on the Nigerian economy. Its total removal will be beneficial, if properly managed. The proceeds from the subsidy should be channelled toward provision of infrastructure facilities that will enhance the economy. Refineries and good roads should be constructed. Our industry structure should be shifted from current oil monopoly to market based,’’ he said.
Rewane appealed to the Federal Government to find a lasting solution to the issue of corruption, saying that it had undermined good economic policies in Nigeria. We have very good economic policies, but many of them have not been implemented as a result of corruption. This in turn has been hindering rapid economic growth,’’ he said.