Falling oil price: Economist underscores need for diversification

A lecturer in the Economics at the University of Abuja on Monday underscored the need to diversify the nation’s economy to curtail the negative effects of the falling global crude oil price.

Dr Gobna Wafure gave the advice in an interview with the News Agency of Nigeria (NAN) in Gwagwalada.

He said that the current dwindling global crude oil price would have serious negative effects on all countries, especially developing economies that depended largely on oil export revenue.

The economics don said that the Nigerian economy which depended on crude oil exports for 98 per cent of its revenue, was vulnerable to the multiplier effect of the falling crude oil price.

He listed the repercussions of this development on the economy as included inflation, budget deficits, poor financing of key sectors of agriculture and  industry.

According to him, the development will also lead to job cuts, resulting to unemployment and crime.

“For a developing country like Nigeria which depends on crude oil exports for 98 per cent of its annual revenue, the economy is bound to suffer; there is bound to be a multiplier effect on all sectors.

“There will be inflation, job cuts causing unemployment and crime, budget deficits due to lack of funds to finance government expenditure based on expected revenue, inability to finance key sectors like agriculture, etc.

“The nation’s foreign exchange earnings will also drop because we buy foreign goods with the proceeds of the oil sold.’’

Wafure, therefore, urged the government to diversify the nation’s economy from being mainly a mono-economy or oil-dependent, by investing in other key sectors from which it can generate national income.

These, according to him, include harnessing the untapped economic potential in agriculture, solid minerals and tourism sectors, and completely reviewing the nation’s tax system.

He recalled that Nigeria’s major revenue source in the past was agriculture but which, he noted that the sector was “abandoned” by past administrations as soon as oil was discovered.

Wafure also noted that the tax generated by the Federal Inland Revenue Service (FIRS) annually was enough to finance Nigeria’s annual budget and called on the government to stem corruption in the service.

NAN reports that dwindling global demand for crude oil had brought the price of Brent crude from its peak price of 115 dollars per barrel in June to about 85 dollars now.