The African Development Bank (AfDB) has warned that the Nigerian economy may face credit crunch in months ahead as the country’s crude oil production declined further by 150,000 barrels per day (bpd).
The AfDB also stressed that the continued crude oil theft and vandalism of oil pipelines as well as recent developments in the global oil market posed a significant threat to the sustainability of the country’s financial position with respect to oil revenues.
The bank gave this warning in its monthly “Nigeria Field Office” (NFO) report, stating the country’s continued reliance on crude oil and gas exports which accounted for 94 percent of export earnings made it difficult to achieve its set targets in crude oil revenues as well as to sustain progress in storing oil reserves.
It said: “The extreme dependence on the highly volatile petroleum income has a strong negative impact on sustaining macroeconomic stability and on growth performance.
“Closely linked to this concern is the need to create conditions for a further significant public and private investment in the non-oil economy, along with improvements in the productivity of this investment.”
The report said the possibility of continued weak growth in value added by oil and gas in the decade would entail that the non- oil economy would have to expand at a faster pace than the estimated 15 per cent annually in real terms.
Specifically, it noted: “Efforts by major consumers of Nigerian crude oil to reduce their dependence on foreign oil imply possible reductions in future demand.”
The AfDB said if predictions by analysts come to fruition, “the United States, the largest importer of Nigeria’s crude oil may become the world’s largest oil producer surpassing Saudi Arabia by 2020.”
Continuing, it noted: “China and Brazil are also said to hold enormous deposits of low cost alternative to crude oil. As Nigeria embarks on the economic transformation agenda, early actions to address the high dependence on revenues from the oil sector must be taken to diversify the economy.”
Information from This Day was used in this report.