GLOBAL OIL PRICE CRASH: A SURVEY OF CHALLENGES FOR NIGERIA
Abstract
The recent oil price crash that started in June 2014 destabilized the Nigerian economy which heavily depends on revenue generated from oil for managing the affairs of the nation. This paper aimed at finding out the causes of the present oil price crash, how Nigeria is affected by the oil price crash, and the way forward. The paper utilizes documentary research method where the data used for analysis in the piece were collected from government’s documents and relevant literature. It also makes analysis using the Emmanuel Wallenstein’s conception of World-System. The paper argues that the major causes of the present oil price crash include: excessive supply, increased geopolitical risks, shift in OPEC’s objectives, and significant US dollar appreciation among others. It argues further that the Nigerian economy is negatively affected in the following ways: it leads to sharp decrease in government revenue; it leads to contraction of Government expenditure and it also leads to inflation. The paper concludes that reliance on single commodity for foreign earnings is not good for Nigerian economy due to risks associated with the global economy. The paper recommends that Nigerian government should diversify the economy by focusing on other sectors that could help her generate more foreign earnings and reduce over reliance on the oil sector. Sectors to give attention include agriculture, industries, and solid minerals.
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