Why Nigeria may lose $26bn over dwindling crude oil sales

The International Monetary Fund (IMF) has projected that the present global health crisis could make Nigeria lose more than $26 billion from crude oil sales.

This projection was contained in the fund’s latest statement, where it revealed that it expects Nigeria’s economy to contract by about 3.4 per cent in 2020; a 6-percentage point drop compared to pre-COVID-19 projections.

Nigeria, Africa’s largest economy, has crude oil as its main export commodity, representing around 90 per cent of its exports.

Since prices of the commodity crashed a few months ag; the country has recorded shortfall in revenue and a few weeks ago, Nigerian cargoes carrying oil were looking for buyers.

“The sharp fall in international oil prices, together with reduced global demand for oil, is worsening the country’s fiscal and external positions. The country’s oil exports are expected to fall by more than $26 billion,” the IMF said in the statement.

IMF further explained the rationale behind its approval of its largest COVID-19 emergency financing package; $3.4 billion, under the Rapid Financing Instrument (RFI) for Nigeria, was due to the impending economic crisis.

Meanwhile, the requested emergency assistance of about $3.4 billion, equivalent to 100 per cent of its quota, under the IMF’s RFI by the federal government of Nigeria, has been approved.

The fund was approved by the IMF Executive Board on April 28, 2020; to help alleviate the impact of the COVID-19 pandemic and the sharp fall in oil prices.

According to the IMF, the money will provide critical support to shore up Nigeria’s health care sector, and shield jobs and businesses from the shock of the COVID-19 crisis. It will also help limit the decline in international reserves.

IMF noted that; “To enhance transparency and governance, the Nigerian authorities committed to undertake an independent audit of crisis-mitigation spending and related procurement processes; and to publish procurement plans and notices for all emergency-response activities; including the names of awarded companies and beneficial owners.

“Special budget lines are to be created to record all crisis emergency response measures; which are published daily on Nigeria’s treasury online portal.

“These measures will not only ensure financial assistance received as part of the COVID-19 response is used for its intended purposes, but also significantly strengthen the oversight of the entire budget used for the government’s crisis response.”