The Observer: Lessons for East Africa From the Global Oil Price Drop
The plunge in the global oil price to the lows of $60 or $55 per barrel, depending on whether your prefer Brent or WTI, has led to significant macroeconomic distortions in key oil-producing economies such as Nigeria and Russia.
Nigeria has been forced to revise its budget downwards to reflect the current oil prices and devalue the Naira. Subsequently, the Nigerian growth expectations have dampened.
While Russia has not yet experienced downward budgetary revisions, the significant drop in oil prices has led to a 45 per cent depreciation in its currency, the Ruble against the US dollar. In a bid to prop up the Ruble, the Russian Central Bank raised its policy rate twice within the month of December from 9.5 to 17 per cent.
While the 17 percent policy rate could potentially stave off further depreciation of the Ruble, it however raises growth-dampening expectations of the Russian economy.