The Negative Effects of Low Oil Prices on Nigerian Economy

Abstract

The energy sector is one of the most the most important components of Nigeria’s economy because of the endowment of the country a wealth of energy resources such as coal and oil. The discovery of oil occurred in the year 1958. The earlier portion of the 1970s was notable for the dominance of oil on the country’s economy. Currently, Nigeria stands out as one of the largest producers of oil in the sub-Saharan part of Africa with estimated production volumes amounting to 2.413 million barrels daily, which makes it the sixth most significant producer. Since the year 1960, Nigeria has managed to reap an estimated six hundred billion dollars in revenues from oil. Despite the vast number of its wealth in oil, Nigeria highlights the highest number of people living in poverty-stricken conditions. With per capita incomes averaging around three hundred and fifty dollars, estimates indicate about seventy million Nigerians as living on less than a dollar daily. The fluctuation of prices, which has been synonymous with the oil industry, does little to provide comfort especially for the long term. From a short-term perspective, Nigeria has been able to establish an increasing albeit volatile growth owing to the high prices of oil on the global scale. From a long-term perspective, a combination of low prices and an undiversified production base will eventually take its toll on the economy, thus resulting in a wide range of negative effects. The high level of dependency for the Nigerian economy on oil implies that volatility of the oils sector have an enhanced impact on government revenue and the determination of financial policy.