Nigeria is known as the “Giant of Africa” because of its abundant human and mineral resources. One of these resources found in large quantities in Nigeria is the crude oil. This crude oil is extracted in the riverine areas like Rivers, Imo, Delta, etc, and transported to the oil refinery for processing. At the moment, the Dangote Refinery is the only functional oil processing facility in Nigeria as Nigeria has been exporting the crude oil and importing the refined oil in previous years before Dangote established his own refinery. This development has led to the increase in the price of petrol and other allied products. With the recent war in Iran with the US and Israel, the global oil price tend to go up astronomically. But below is how Nigeria is adapting to the fluctuating oil prices.
1. Floating the Naira: One of the major economic policies of the current administration led by President Bola Ahmed Tinubu is that of market liberalization. The forex market began to witness a significant turnaround upon his ascension to power. The dollar exchange rate which was very high began to crash significantly. Floating the Naira helps to reduce the uncertainty that is created by a strong market force called speculative demand. This speculative demand makes people very much eager to buy oil at any given with the fear that the price may go higher than it is at the moment. This has invariably increased the price of commodities, oil inclusive. Floating the Naira also helped to generate more revenue to the government through increased taxation.
2. Removing fuel subsidy: This was witnessed on his inauguration day as president. On that day, President Tinubu stood before the mammoth crowd that came to witness his swearing-in ceremony and declared that subsidy was gone. Since that day, the economy took a new shape and direction as the oil price from that day skyrocketed. It moved from the N185 to N550 in a matter of two days. Since then, it has never dropped below N600. There was a point it got to N1200 and it started falling until it got to N850. The petrol pump price went up again as a result of the US and Iran war. At the moment, a liter of fuel is now N1400. It goes on to explain the fact that the petrol price is largely influenced by global oil price and other factors beyond Nigeria.
3. Reopening borders: One of the policies that stifle economic growth in Buhari’s era is the closing of the Nigerian borders. This was done with the sole purpose of promoting local production and indigenization. But, inasmuch as this is commendable because it made way for strong local market structure and innovation in the country, it also led to mass job loss and untold hardships. This is because there was no modalities put in place to cushion the effects of such harsh economic policies. It became a moment of relief when the Tinubu announced the reopening of the borders. This helped importers to do business properly by importing oil at a given global price.
4. Encouraging local production: The Nigerian government has shown interest in promoting local refinery by giving a license to Dangote Refinery and other modular refineries to operate. This helped to reduce the amount of oil being imported into the country. This is evident in the way in which we have not had any fuel scarcity for some years now. Nigeria is gradually moving towards becoming a producing nation instead of a consuming nation. This is made possible by the increase rate of local production of oil. This is Nigeria’s way of adapting to the fluctuating global oil price.
5. Providing security and accountability in the oil sector: There have been a lot of stories about pipeline vandalism, oil theft, oil bunkering, and corruption in the oil industry. This has indirectly affected the revenue of Nigeria and its purchasing power in the global market. With the dwindling oil price in the global market comes the pressure to secure the oil minerals and their facilities. This made the President and his predecessor assume the position of petroleum minister up to this day. This is a way of adapting to the fluctuating global oil price by reducing theft, wastage and corruption that have bedeviled the oil sector.
6. Building International alliances: Tinubu has tried in some ways to build alliances with other countries for the good of Nigeria’s economy. We have heard of his working visit to the UK, Italy, Turkey, etc. All these visits are geared towards ensuring a soft landing pad in the event of oil price fluctuation in the global market. It’s presumed that the fluctuations of oil prices in recent times signaled a new dawn in the oil sector. The truth remains that Tinubu has been going about on some of his trips to meet world leaders and industry captains who will ensure that Nigeria’s economy is not grounded in a case of such eventuality.
7. Getting foreign attention: Due to the increasing global oil price, Nigeria has been able to attract global attention and foreign investors following the fluctuations of the oil prices and the exploitation proclivity of the venture capitalists. Recently, the US President, Donald Trump declared Nigeria a country of particular concern, citing Christian genocide as a major reason. But beyond the genocide narrative is a compelling desire to exploit Nigeria, beyond its oil and mineral resources. Nigeria has gotten the attention of the world because of what America did to the Colombian President. This global attention helped Nigeria a lot in adjusting to the global oil price.
8. Debt management and servicing: The current Nigerian President has made a move to get more loans as a means of stabilizing the economy and also facilitating infrastructural development. The loan has been approved by the National Assembly comprising the Senate and the House of Representatives. This means that Nigeria’s debt profile has increased by billions of Naira. However, this is made in the interest of the people instead of increasing taxation and suffering of the people. Borrowing money from external bodies is the government’s way of adapting to the fluctuating global oil price.
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