Oil price drop: Finance Minister, Okonjo-Iweala Tells Nigerians To Brace up For Tougher Times

Oil price drop: Finance Minister, Okonjo-Iweala Tells Nigerians To Brace up  For Tougher Times

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As the global oil prices which started in June continue its downward fall, Nigeria's Minister of Finance, Dr. Ngozi Okonjo-Iweala, on Thursday to brace up for tougher times as the country would from this month begin to feel the impact of the fall.

The Minister also insisted that the country must review its expenditures and build economic buffers through budgets that would be based on modest oil prices.

She also maintained that sound macroeconomic management is crucial to Nigeria at this time, while also emphasizing the need to plug all revenue leakages.

Okonjo-Iweala made this disclosure while speaking in Lagos at the Africa Financial Summit organised by the Institute of International Finance and Access Bank Plc.

She said, “We have not seen the impact of the falling oil prices in Nigeria; it will start this month. We have to drive the non-oil revenue base to be able to weather the storm that is coming,” Okonjo-Iweala said.

The Minister , however, stressed that Nigeria was not alone in the coming economic storm, pointing out that a large number of African countries that relied on commodity export as the mainstay of their economies would also be affected by the global fall in the prices of such commodities.

The minister said the global fall in the prices of export commodities
such as gold, iron ore and agricultural produce such as cocoa, cotton
and coffee was bound to affect most African economies, which relied
on commodity export as the major source of revenue.

Quoting from the United Nations Conference on Trade and
Development, Okonjo-Iweala said the ratio of export commodity to
total merchandise was very high in a large number of African
countries.

According to her, it is 60 per cent in South Africa; 89 per cent in
Zambia and Ghana; 96 per cent in the Democratic Republic of Congo;
and 83 per cent in Nigeria.

She said based on the 2013 data, 70 per cent of sub-Saharan Africa’s
merchandise exports went to regions that were currently facing
slowdown.

Ten per cent of commodity exports from the sub-Saharan Africa go to
the US; 26.5 per cent to Europe; three per cent to Japan; 21 per cent
to China; and three per cent to Brazil, according to the minister.
Consequently, Okonjo-Iweala said there was an urgent need for Nigeria
and other African countries to explore other means of shoring up their
revenues in the face of the falling prices of export commodities.
She said borrowing to fund annual budgets would not be a better
option for most African countries.

“I strongly urge other African countries to look into other directions.
We need to build our economic buffers. Of course, there will be
pressure to borrow in the face of falling commodity prices, but we
cannot afford to borrow. There is a need to drive domestic resource
mobilisation,” Okonjo-Iweala maintained.