Nigeria listed among OPEC’s “overlooked” oil producing countries
A study by American basic cable, internet and satellite business news television channel owned by NBC Universal News Group, CNBC, has shown that Nigeria is globally overlooked as one of the Organisation for Petroleum Exporting Countries, OPEC countries that keep the world supplied with oil.
According to the report titled “FIVE OIL ECONOMIES YOU (PROBABLY) DIDN’T KNOW ABOUT, BUT SHOULD”, CNBC said OPEC countries like Saudi Arabia, Iran, Libya and Venezuela are the major oil producers in OPEC, while the likes of Nigeria, Angola, Gabon and Trinidad, “although are some of the largest oil and natural gas producers, yet are often overlooked”.
The report also said although both countries listed under the ‘major’ and ‘minor’ are under pressure from falling oil prices, “still, the dynamics in these individual countries(minor oil producing countries), are worth taking a look at, especially because crude markets remain as volatile as ever”.
Due to the global slump in crude prices which has hammered on Nigeria’s economy, famed short seller, James Chanos recently told the annual Sohn Investment Conference that Nigeria “is caught in a macro hurricane”. And that with currency reserves running low, the country could have “a big problem” within few years.
Calling Nigeria “a borderline failed state”, Chanos added that he was shorting South Africa assets, in part because of their exposure to Nigeria.
“Nigeria is in trouble”, Steve Hanke, a professor of applied economics at Johns Hopkins, told CNBC in an interview.
The country’s foreign reserves are dwindling amid double-digit inflation, even as the federal government battles to raise the value of naira.
Oil prices have remained under $50 per barrel, this heightens the risk of what consulting firm, PricewaterhouseCoopers said in its 2015 could become a “security shock” for Nigeria.
Currently, Nigeria’s 2016 budget was pegged on an oil price of $38 per barrel.
Oil accounts for 95 percent of Nigeria’s foreign earnings, and if crude prices remain at current level, PWC says growth to contract oil revenues will drop to $20 billion. Meanwhile, the naira has already dropped below PWC’s worst-case forecast for 2016, surging past 320 to the dollar recently.
“The currency is junk and the government is incompetent and corrupt,” said John Hopkins Hanke. “The only sure-fire way to solve all these problems is for Nigeria to officially replace its junk currency,” Hopkins added.
To say the least, Nigeria still has limited access to capital markets, and with a $6 billion currency swap agreement with China, analysts say may help to contain naira losses but are still skeptical the country’s economy will bounce back anytime soon.
“The absence of an adequate shock absorber will weigh on Nigeria’s outlook,” Standard Chartered told his clients in a recent research note.
“Confidence is still correlated to the oil price and low accumulated savings do no help. Efforts to diversify the economy are likely to be hampered by a growing shortage of foreign exchange,” the firm added.
