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The country depends on oil windfall to balance its budget. Even before the onset of the crisis, its reserves
were insufficient to protect it from external shocks.
For Nigeria, the fall in oil prices could not have come at a worse time. The most populous country in Africa
depends largely on the revenues of black gold to balance its budget. The erosion of the price of a barrel these two
last few years had already reduced its foreign exchange reserves. And a good part of the country's debt is held
by foreign investors, who may be tempted to sell during a period of great uncertainty
on the financial markets.
The West African giant is directly threatened, according to the director of the International Energy Agency
(IEA), Fatih Birol. "I'm worried about some of the big oil-producing countries," he said Monday. There is
enormous pressures on the financial equilibrium of many producers, while the collapse of the prices of the
oil is driving their revenues to historic lows. Three countries, according to him, are particularly fragile:
Iraq, Angola and Nigeria.
In Nigeria, hydrocarbon exploitation accounts for almost half of tax revenues and about 85%
of exports in value. Their weight in public finances is disproportionate to their place in
the economy. Oil and gas account for only 10% of national wealth and a few dozen
thousands of jobs, in other words almost nothing in a country of 190 million inhabitants. But for the state, the situation
is serious. "Even before this week's oil shock, foreign exchange reserves did not offer a level of
sufficient protection, says Mahmoud Harb, an analyst at Fitch Ratings, given the vulnerability
outside Nigeria", and in particular its dependence on oil prices. These reserves increased from 45
billion dollars in the summer of 2019 to 38 billion at the end of 2019 and 36 billion last Friday, says the analyst.
In December, the agency considered the outlook for the country's sovereign rating to be negative. For
Attracting investors, the Nigerian Central Bank has also bet on unconventional instruments,
particularly volatile. This increases the country's vulnerability in times of crisis.
Hope for the economy
Several oil companies - Royal Dutch Shell, Chevron, ExxonMobil, Total, Eni and Equinor - are
present in Nigeria. If the fall in oil prices continues, they should review their strategy
of investment in the country. An ongoing revision of the Organic Petroleum Law, which determines the level
was already a major cause of uncertainty for these groups.
In the short term, the government plans to reduce its budget and boost production. Which does not
may accelerate the fall in prices. In the long term, however, a fall in prices offers hope for
the economy: reducing its dependence on raw materials. "Nigeria is a good example of the curse
of oil, comments Philippe Copinschi, professor at Sciences Po. If prices remain permanently low, this
could push the government to accelerate the transformation of the economy. »