Nigeria, Africa to benefit from rising oil price — Uwaleke

Nigeria, Africa to benefit from rising oil price — Uwaleke

Sunday, May 5, 2019 9:45 pm

Oil rig

Prof. Uche Uwaleke of the Department of Banking and Finance, Narsarwa State University,  said the rising global crude oil price would help Nigeria’s budget deficit and induce development in Africa.

 Uwaleke disclosed this in an Interview with the News Agency of Nigeria (NAN) on Sunday in Abuja.

Oil prices inched up on Friday as strong U.S. economic data boosted demand sentiment with Brent crude oil futures settled at $70.85 a barrel, rising 10 cents.

 The global benchmark crude shed 2.6 per cent for the week, breaking a five-week winning streak.

Uwaleke said that African countries that export oil could use the period of rise in crude prices to attain reasonable development, if they plan well.

According to him, it is a wonderful opportunity for Nigeria to catch up with its budget implementations.

“Rising crude oil price will go a long way in reducing Nigeria’s budget deficit and by implication minimize our borrowing requirements and the country’s debt burden.

“It is a good development for oil exporting African countries including Nigeria.

“It is an opportunity to save and build fiscal buffers in the event of a slump in projected government revenue,’’ he said

He further noted that the rising crude prices would help to increase remittances to thr Federation Accounts Allocation Committee (FAAC), adding that it would place state governments in a strong position to discharge their responsibilities including implementing the new minimum wage.

“Since economic activities in Nigeria depends so much on crude oil revenue, it is also expected to translate to rising GDP.

“ For sure, there will be accretion to external reserves and further stability in exchange rate.

“It is also positive for capital inflows as it engenders increased confidence on the part of foreign investors and international lenders in dealing with Nigeria,’’ he added.

Uwaleke also noted that rising crude oil price usually leads to an increased tempo in stock market activities.

“ But the downside of this development is the negative impact it has on cost of imported petroleum products and the growing oil subsidy,’’ he said.

 However, in an interview with NAN, Wunmi Iledare, Professor of Energy Economics, said that a sustained high oil price was not good for the global economy.

He said that the development implied high cost of production and low economic growth in oil and consuming nations.

“And for oil producing countries like Nigeria, it can create dislocation in the economy leading to inefficiency, lack of transparency and accountability.

“Without proper accountability, producing oil for cash flow is detrimental to sustainable economic development. 

“Most often oil for cash because of high crude prices creates unsustainable cash surplus with governance framework that is based on patronage and sentiments,’’ he added.

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