Nigeria faces economic crisis if oil prices fall —Sanusi

By IndepthAfrica
In Nigeria
Apr 15th, 2012

THE Central Bank of Nigeria (CBN) governor, Mallam Lamido Sanusi, has said a sharp fall in oil prices would be a relief for much of the world, but for Nigeria it could spell big trouble.

According to the CBN governor, who was speaking in New York, United States, “there will be a very bad day and a lot of gnashing of teeth if the oil price crashes and we haven’t saved a thing.”

“Nigeria is one of the world’s fastest-growing economies, but it remains dependent on oil production, which accounts for about 80 per cent of government revenues,” Sanusi said.

Sanusi noted recent discussions between the United States and other industrialised nations about the possible release of strategic petroleum reserves and signs that producing countries, such as Saudi Arabia, might increase output to help bring down oil prices.

“Our major concern is that a major decline in the price of oil or (domestic) output would lead to a massive depreciation of the currency, a collapse in reserves and a huge growth in deficits and some of the states outside of the oil-producing region might find themselves in a situation where are not able to pay salaries,” he said.

Sanusi added that “I am trained to think in terms of what if,” adding that it was the mindset he brought to his job.

“What happens if oil prices go to $50 a barrel? It’s happened before,” he said, while charging the government not to spend more than the N880 billion earmarked for subsidies in 2012 budget.

Sanusi said a decline to around $85 or $90 a barrel from around $120 now could lead to a shortfall in projected revenues and higher budget deficits, if Nigeria’s oil output did not increase. Tribune

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