‘Why oil price crash will hurt Nigeria for years’

23 March 2016, Abuja – The National Economic Council (NEC) was told that Nigeria will suffer the effects of the oil price crash for a few more years as the country lacks enough non-oil revenue base.

*Oil prices drop.

*Oil prices drop.

Former Deputy Chairman of the Indian Planning Commission, who was a guest speaker at the retreat, Montek Singh Ahluwalia, told State House reporters that he made this known in his presentation.

Ahluwalia also said the Value Added Tax introduced by the federal government was far below what was required to withstand the oil price shock.

According to him, Nigeria’s VAT has lots of exemptions, and the coverage is quite limited.

“It has not covered many people who should be covered. So, I think the top priority should be to modernise and improve the VAT so that it becomes a bigger source of revenue in the days ahead. I think that is possible,” he said.

He added: “One thing is very clear: the oil price collapse has led to a very big decline in growth in Nigeria, and nobody thinks that the oil price is going to shoot up in the short run.

“Nigeria has to recognise that the suffering of the oil price has to be there for a few years. How does Nigeria react to that? The vice president (Osinbajo) made a very good point that we should not rely on oil as if it’s everything. We should think that maybe we’ve to do without oil revenue.

“If you take that view, I think that’s the best approach. One thing is very clear: non-oil revenues in Nigeria are too small. Even if you compare Nigeria with other oil-exporting countries, you’ve not enough non-oil revenues. So, the highest priority from a micro-economic point of view will be to develop the non-oil revenue base. The federal and state governments can do something about that. But I feel that your (Nigeria’s) VAT that you’ve introduced is at a very low rate”.

  • Daily Trust
About the Author