LAGOS, April 29 – Nigeria’s oil and gas exports are expected to decline by at least $26.5 billion as the novel coronavirus batters international prices and cuts fuel demand, the International Monetary Fund said late on Wednesday.
As the COVID-19 pandemic is severely impacting Nigeria’s economic activity.
The sharp fall in international oil prices and reduced global demand for Nigeria’s oil products are worsening the fiscal and external positions, as Nigeria’s oil and gas exports (84 percent of total exports) are expected to fall by more than $26½ billion.
The economy is projected to contract by almost 3½ percent in 2020, a six-percentage point drop relative to pre-COVID-19 projections.
The already high downside risks—particularly from sharper and protracted falls in oil prices, a declining oil production from future OPEC caps or inability to sell oil cargoes, and more protracted disruptions to economic activity due to a more expansive effect of the pandemic—have heightened.
Nigeria, Africa’s largest oil exporter, told the IMF in a letter requesting emergency financial assistance that the drop in oil prices, which provide more than half of government revenue, and the economic shocks related to the new coronavirus left it with an external financing gap of $14 billion.
The IMF on Tuesday approved Nigeria’s full $3.4 billion request. In the detailed brief related to that decision, released on Wednesday, the IMF warned that Nigeria remained exposed to rising risks, particularly in oil markets.
“Rising unsold cargoes could also impact oil production, which could decline further through OPEC agreed cuts or if prices persist below production costs,” the IMF said.
The country is seeking additional funds from the World Bank, the African Development Bank, the Islamic Development Bank and Afreximbank, the IMF said.
International oil prices have fallen sharply as lockdowns aimed at stemming the spread of the virus cut global fuel demand by roughly 30%. Nigeria is also in the midst of cutting oil output in line with an OPEC agreement with other major producers.
In its request letter, Nigeria also outlined plans to allow a “more unified and flexible exchange rate regime,” to increase its revenue to 15 percent of GDP and to move to cost-reflective electricity tariffs by 2021.
It also said a new fuel price regime, outlined in March, would permanently eliminate costly fuel subsidies. The subsidies cost an estimated 10 trillion naira ($27.78 billion) from 2006 to 2018.
International players, including the IMF, have long pressured Nigeria to pursue all the goals outlined. ($1 = 360.0000 naira)