Global Research: Oil and Gas Prices and African Economies

During 2014 many western-based financial publications declared that the Federal Republic of Nigeria had surpassed the Republic of South Africa as the largest economy on the continent. Nigeria relies heavily on oil exports for the generation of its foreign exchange earnings.

Recently the Minister of Finance Dr. Ngozi Okonjo-Iweala delivered a major policy address indicating that the rapid decline in oil prices would necessitate the imposition of measures by the government of President Goodluck Jonathan designed to trim costs and spending. In a later interview with a leading Nigerian newspaper, the finance minister admitted that as a result of the price declines, the government was forced to cut its capital expenditures by 59 percent.

Okonjo-Iweala said “For a number of reasons, chief among which is oil pipeline vandalism and the resulting shut-ins, we faced a quantity shock in the sense that the quantity of oil produced averaged about 2.2 million bpd in the first three quarters of 2014, according to NBS data, falling short of the 2.38 million bpd projected in the budget. The effects of this quantity shock are further compounded by the more recent price shock, with prices crashing from a peak of about $114pb earlier in June, to around $58pb now, which is below the budget benchmark price of $77.5pb for this year.”
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