Falling oil prices and domestic energy output due to declining global demand are a concern for Nigeria’s economy, the country’s Central Bank Governor, Mallam Sanusi Lamido Sanusi said yesterday.

The worsening situation in the Euro zone and rising global food prices may also push inflation higher, Sanusi said in an interview on Nigeria investment conference, adding that the country’s slower growth and tighter fiscal discipline could counter balance those upward effects.


Sanusi
Nigeria is among the top 10 crude oil exporters in the world and is one of Goldman Sachs’s N-11 emerging economies after the power houses of the BRIC countries — Brazil, Russia, India and China.

Nigeria’s 2012 budget is based on an oil price of $72 a barrel and oil fell below $90 in recent weeks, though it has since reached $100.

Nigeria exports most of its domestic output and figures show exports have been falling, suggesting falls in output. Exports are set to fall, to 1.81 million barrels per day (bpd) in September, a provisional loading programme showed last week.

“The budget is based on assumptions of output of 2.4 million barrels a day, and output has been underperforming, so $72 may not be an effective benchmark,” Sanusi said.

Long before you get to $72, you will have major strains on government revenues, so long as output doesn’t improve.” Sanusi said the euro zone sovereign debt crisis, along with vulnerability in the U.S. economy and growth slowdown in India and China, were having an impact.

Dip in economy blamed on movements in commodity price

He said: “The price of oil is affected by global demand. The economy remains highly vulnerable to movements in the commodity price, the global outlook is important,” adding that a slowdown in growth in emerging economies was contributing to the drop in demand, unlike during the sub-prime crisis.

In 2007, 2008, 2009, when Europe and America were slowing down, China, India and Brazil were there to take the slack, now there is nobody.”

Nigeria’s Finance Ministry has cut its 2012 growth forecast to 6-7 percent. “We would broadly agree that it’s reasonable to expect a slowdown,” Sanusi said.

Nigeria’s double-digit inflation — 12.9 percent in June —prompted surprise tightening measures from the CBN last week. The apex bank left rates on hold at 12 percent, but raised banks’ Cash Reserve Requirement, CRR, to 12 percent from eight percent and reduced net open foreign exchange positions to one percent from three percent to support the weakening naira. The naira has recovered from two-month lows since then.

He added that “The increase in the CRR was perhaps far more effective for tightening than an increase in interest rates. Interbank rates have responded, the exchange rates have also responded. Interbank rates rose as high as 19 percent this week. We don’t want them to be there, we think there will be moderation, but we think they will be higher than before the tightening.”

Sanusi said inflation forecasts of 14.5 percent peaking in the third quarter were made in January, when the global outlook was more benign. “There are other factors at play, rising global food prices, uncertainty that was not there in January, usually which was the time when we thought the Euro zone had fixed its problems

Moderation in govt spending

He added that “moderation in government spending” should help contain inflation, and that for Nigeria, “growth hasn’t been very fast”.

Fuel subsidy not sustainable

Nigeria is struggling to cope with the costs of its fuel subsidies, which were only removed in part in January following widespread protests. Despite Nigeria’s oil exports, decades of corruption and mismanagement mean it has to import most of its refined fuel needs.

The Nigeria National Petroleum Corporation, NNPC, said last week it was owed $7 billion in government fuel import subsidies. Debts which would wipe out savings in the country’s Excess Crude Account, ECA, where it saves oil revenues over the benchmark price of $72 a barrel.

Sanusi said: “My position has always been clear, the subsidy is not sustainable,” adding, however, “There are political obstacles in removing it totally.

Not worried by Fitch Ratings report

He said he was not worried by a recent report from ratings agency, Fitch that Nigerian banks’ asset quality was at risk from recent rapid credit growth.

He said banks should be increasing their lending to small and medium-term enterprises. “In my job, I have more information on the banks than Fitch has, and I don’t have the concerns that Fitch has”, he added.

http://www.vanguardngr.com/2012/08/falling-oil-price-threat-to-nigerian-economy-sanusi/

So whats the bottom line of this story...? Oh..! That means 1liter of petrol would go for 150 for Nigeria not to collapse....? So who will suffer again..? The masses abi...? This would be very easy, if Mr Mark would start by cutting down his 600m naira annual salary to the lowest minimum, if GEJ would also follow and every other public office rep'.... Or is it a curse to have petrol, that 97per liter would only go down, not up... If Nigeria wan enter debt like Greece make e enter...

It's no rocket science. Subsidizing fuel 'consumption' is never the way to go.

Subsidy, if needed at all in any sector, should be in production, NOT in consumption.

Actually I'm with Sanusi with regard to the economics of fuel subsidy. Ordinarily, I would prefer that funds currently being used to subsidize fuel importation be redirected to support labour-intensive industries like the textile sector and help create jobs.

That being said, there's NO WAY subsidy removal will fly with the average Nigerian if the subsidy thieves are not prosecuted and duly jailed, if government of all arms and tiers continue to demonstrate such mindless profligacy when 112 million of their compatriots continue to live in poverty. A massive build-up of social capital and trust is needed for this deregulation policy to see the light of day.

HNosegbe: Actually I'm with Sanusi with regard to the economics of fuel subsidy. Ordinarily, I would prefer that funds currently being used to subsidize fuel importation be redirected to support labour-intensive industries like the textile sector and help create jobs.

That being said, there's NO WAY subsidy removal will fly with the average Nigerian if the subsidy thieves are not prosecuted and duly jailed, if government of all arms and tiers continue to demonstrate such mindless profligacy when 112 million of their compatriots continue to live in poverty. A massive build-up of social capital and trust is needed for this deregulation policy to see the light of day.

Prosecute (and jail) millionaire subsidy thieves, in this country? With the kind of judiciary we have? When an ordinary 'certificate forgers' and confirmed perjury perpetrator was let off the hook on technical ground. I pray it does happen, but I know for sure that 'una go wait tire.'

As per dealing with profligacy in government , well that is in the hands of the people. Until we are united enough in our opposition to the 'waste' it wont stop. What more can unite us other than full removal of the subsidy? Right now, the average Nigeria is part of those 'looting' the country. By encouraging the wasteful subsidy with their protestation and opposition to the removal, they are helping mortgage the future of their unborn. They have indirectly given all arms of government the opportunity to under-change them.

We can continue arguing to and forth on which should come first, while the subsidy thief perfect more strategies, and discover other loopholes to enrich themselves, and government their waste! I dey laugh!

HNosegbe: Actually I'm with Sanusi with regard to the economics of fuel subsidy. Ordinarily, I would prefer that funds currently being used to subsidize fuel importation be redirected to support labour-intensive industries like the textile sector and help create jobs.

That being said, there's NO WAY subsidy removal will fly with the average Nigerian if the subsidy thieves are not prosecuted and duly jailed, if government of all arms and tiers continue to demonstrate such mindless profligacy when 112 million of their compatriots continue to live in poverty. A massive build-up of social capital and trust is needed for this deregulation policy to see the light of day.

you know thats never going to happen , they will arrest them and the next thing you know they are out on bail. thats the judiciary for you

bashr8: you know thats never going to happen , they will arrest them and the next thing you know they are out on bail. thats the judiciary for you

Knowing this, methinks another round of protests may be necessary to force their prosecution because this adminstration/ruling party/legislature/judiciary appears too compromised.

As far as am concern the falling oil prices doesn't actually affect most Nigerians.

Our problem is not falling oil prices but monetary and Fiscal policies of the Govt.

Why must CBN gives share Naira and not Dollar certificates during Federation allocation? This monetary policy is the singular distorting the Nigeria economy, while issue treasury certificates at 15% to mop up "excess liquidity" is the worst form of fiscal policy a govt can adopt. Even Greece and Spain are not borrowing from the EU nations at that crazy rates. So the bank will rather wait for the govt for a risk free loan at 15% than give to a risky real sector at 21%.

The govt..competing with its citizens....foolish policies!

We are waisting our time pursuing subsidy thieves.

Simple solution:

Remove subsidy!

noblezone: We are waisting our time pursuing subsidy thieves.

Simple solution:

Remove subsidy!

will CPC/ACN, opportunist politicians, misguided youths,clueless labour union and some ethnic bigots allow that to happen? as long as subsidy stays we will continue to have subsidy thieves and our judiciary is too currupt to prosecute them and yet we still experience scarcity. like you said the best thing is to end subsidy once and for all.

bashr8: will CPC/ACN, opportunist politicians, misguided youths,clueless labour union and some ethnic bigots allow that to happen? as long as subsidy stays we will continue to have subsidy thieves and our judiciary is too currupt to prosecute them and yet we still experience scarcity. like you said the best thing is to end subsidy once and for all.

Bros, I don't think it is a party thing. This guys are also in PDP and all other parties.
It is a Nigerian thing.

It is no only the Judiciary, the law enforcement agents are all involved. As for the labour unions? Well, who ran down Nitel? Who destroyed NEPA? Who made sure the refineries are not working? It is a pity.