04 June 2016, Abuja – The recent spate of bombings of oil facilities in the Niger Delta has put the Nigerian economy in dire straits, plunging the country further down the road to a financial crisis.
Latest data released by the National Bureau of Statistics, NBS, said the Nigerian economy is teetering on the brink of recession and the increase in bombings is throwing the country deeper into the abyss.
The situation becomes worrisome when viewed against the backdrop that crude oil exports account for about 70 per cent of Nigeria’s revenue and 90 per cent of Nigeria’s foreign exchange earnings.
In the wake of the return of hostilities in the Niger Delta, Minister of State for Petroleum Resources, Mr. Ibe Kachikwu, had a few weeks ago, stated that Nigeria’s crude oil output had dropped to 1.4 million, but analysts are of the view that the country’s crude oil output would have dropped significantly to about 900,000 barrels per day as at today.
What is this means that the country is currently losing about 1.3 million barrels of crude oil daily due to the bombing. This is exclusive of the huge volume of gas that is transported through the affected pipeline.
In monetary terms, with the current price of Light Crude oil at about $48.94 per barrel, Nigeria is currently losing about $63.622 million on the deferred 1.3 million barrels of crude it could not export.
This is an equivalent of N12.724 billion per day and N381.732 billion per month. Already, the NBS GDP report for the first quarter of 2016 had stated that the crude oil component of the country’s total trade decreased by N716.7 billion or 46.6 per cent against the level recorded in fourth quarter 2015.
In addition to the loss in revenue to the country, power supply is gradually inching closer to zero, as the attacks have crippled almost all of the country’s power plant.
Currently, power supply is put at about 2,800 megawatts (MW), dropping to as low as 650MW within the week, from a high of 5,074MW recorded in February. Dallas Peavey, Chief Executive Officer of Egbin Power Plc, stated that the company’s power generating capacity had dropped to less than 10 per cent of its 1,320 megawatts capacity.
“We are just sitting idle here,” he told newsmen. In addition, he stated that until the violence ends and gas supplies resume unhindered, the company has suspended plans to double the capacity of power plant, saying that “We cannot double the capacity if we cannot find fuel.”
Desmond Ogba, Managing Counsel and Head of Energy Projects at Templars, a Nigerian law firm, also warned that if the vandalism is not addressed urgently and comprehensively, electricity will continue to deteriorate and the government’s aspiration to significantly increase power generation by 2019 would be a mirage.
As a result of all these negatives, economic analysts are of the view that the future for the Nigerian economy appears bleak, and it is expected that the country’s Gross Domestic Product for the second quarter would be negative, meaning that the country is officially in recession. The situation worsened further for Nigeria, especially with the low oil price, as revenue accruable to the Federal Government would drop drastically.
Already, the amount shared by the Federal, state and local government, had over the months been dwindling. Even with the slight rebound recorded in the price of crude oil in the last couple of days, the country would still be at a disadvantaged, as its low oil output would further worsen the situation.
Reacting to the bombings, Acting Director-General of the proposed Maritime Security Agency (MASECA), Mr. Jacob Ovweghre, said the actions of the Niger Delta Avengers, NDA and other militant groups would wreak the Nigerian economy and cause even greater pain to the people of Niger Delta, who would bear the direct burden of the crisis and not the government. According to him, the destruction of the pipelines in the Niger Delta will reduce the states’ revenue bases and bleed the nation’s economy, increase environmental degradation, pollution, poverty, hunger, school drop-out, unrest, insecurity, under-development and economic loss.
He called on the NDA and other militant groups to desist from bombing crude oil facilities in the Niger Delta and from engaging in other acts of economic sabotage. Ovweghre advised the NDA to have a rethink of their action and use intellectual agitation within the ambit of the law to pursue their demands, so as to gain credibility. It is hoped that the Federal Government resolve the crisis amicably so as to prevent the economy of the country from being brought to its knees.