The sharp fall in oil prices in the last seven months has resulted in a 28.05 per cent drop in Nigeria’s revenue. The country’s gross receipts fell to a total of N3.676 trillion between July 2014 and January 2015, figures compiled by THISDAY have shown.
This represents a reduction by N1.433 trillion, compared to N5.109 trillion gross federally collected revenue recorded by the Central Bank of Nigeria (CBN) in its economic report for the first half of 2014.
Brent crude price which peaked at $115 a barrel in June last year, declined to about $45 per barrel by January this year before rallying to $60 per barrel last month.
Crude oil accounts form about 90 per cent of Nigeria’s export earnings and 70 per cent of total revenue. As such, any drop in the price of oil has a significantly negative impact on the Nigerian economy resulting from the revenue shortfall.
The Federation Account Allocation Committee (FAAC) report between July 2014 and January 2015 compiled by THISDAY showed a decline in the country’s gross receipts, just as the net distribution among the three tiers of government also slumped.
FAAC holds monthly meetings on the monthly distribution of revenue accruing to the Federation Account to the federal, state and local governments.
The figures revealed that while Nigeria’s gross receipt in July 2014 was N630.3 billion and N601.6 billion in August 2014, it further dropped to N502 billion in September 2014, N536.6 billion in October, N500 billion in November 2014 and N490 billion in December 2014. The country recorded further heavy decline in gross receipts in January 2015, as revenue dipped to N416 billion.
On the other hand, the net distribution shared by the federal, state and local governments in the last seven months stood at a total of N4.172 trillion. A breakdown of this showed that in July 2014, a total of N654 billion was shared among the three tiers of government, N611.7 billion was shared for August 2014, N603.5 billion for September 2014, N593.3 billion for October 2014, N628.7 billion for November 2014, N580.3 billion for December 2014 and N500.1 for January 2015.
A former Chairman of the Asset Management Division of Goldman Sachs Group, Dr. Jim O’Neill, in a recent interview with THISDAY, had advised policy makers in Nigeria to use the opportunity of the drop in crude oil prices to speedily diversify the economy.
According to O’Neill, the falling crude oil prices would test the flexibility of the Nigerian economy.
The renowned economist said: “In my opinion, for all oil producing economies, it is important that as oil prices decline, they should diversify and not just depend on oil prices.
“It is very dangerous for oil producing countries to just depend on oil. In some way, declining oil prices are an important test of Nigeria’s economic resilience.”
Also, Senior Consultant/Chief Executive Officer, RTC Advisory Services Limited, Mr. Opeyemi Agbaje, stressed the need for the government to create policies and incentives that could promote non-oil exports by Nigerian firms.
He pointed out that although the current structure of Nigeria’s Gross Domestic Product (GDP) shows that the country has achieved significant diversification in terms of local production and consumption, there is need for Nigeria to be competitive in the area of non-oil exports of goods and services by the private sector.
Agbaje cited the case of South Africa, whose export revenue is driven largely by private sector firms such as MTN, DSTV and South African Breweries, among others.
“The challenge for the Nigerian economy is for government to create policies and incentives that will allow our private sector to become exporters.
“If our export revenue was earned by thousands of Nigerian companies exporting their services, we would not collapse anytime the price of oil falls.
“We also need to start refining our oil domestically and exporting it. We should be one of the biggest exporters of refined petroleum products in the world.
“There are significant opportunities in Nigeria. If you look at the structure of Nigeria’s GDP, you will see that huge opportunities abound in Nigeria.
“In terms of the structure of domestic production, we have done a good job of diversification, but the problem is that in terms of the structure of export and government revenue, we have not done enough,” he said.