‘How Falling Oil Price Can Benefit Nigeria’.

Experts have said that Nigeria can only benefit from the low price of crude oil at the international market by developing its manufacturing sector using crude as energy source for factories.

According to industry analysts, unless Nigeria develops a mechanism by which it would begin to utilise its crude production internally, the naira would continue to be put under pressure due to the falling oil price.

Experts have urged the federal government to ensure optimum benefit from the current fall in oil price by shifting the focus from export of crude oil to internal use in view of being blessed with a large population and unarguably having the largest market in Africa.

Speaking at the Emerald Energy Institute of the University of Port Harcourt, a Professor of Financial Economics at the University of Uyo, Dr Leo Ukpong, noted that the falling crude price would continue to put pressure on the naira as long as Nigeria continued to depend on crude export as its source of income. He submitted that while the country must look for new outlets for its crude in the short run, it must develop its manufacturing sector as the ultimate consumer of its crude production.

He said, “Oil price fall is a blessing for those who use it as input of production and sell it out. For you to take energy as a production input that means you import oil cheaply and the price of goods will also drop.

“The way we can change that is to start manufacturing the goods we need to meet our own demand again. If we do that, when oil price drops, because the energy that we use in manufacturing is down, the price of those goods will also drop.

When the price of goods drop more people buy, but we are not selling anything outside oil and remember oil price is not determined by us. We see oil price drop as a problem because we do not have the ability to benefit from it,” the university don stated.

Citing Saudi Arabia as an example, Ukpong pointed out that the country was not under much pressure from the impact of the fall in oil price because it manufactures most of what is consumes locally. Speaking further, he stated that Nigeria also needs the introduction of new technology to increase reserves, adding, “All you need to discover your reserve is new technology.

What drove the oil price down was technology which nobody knew of 30 years ago.” The don added that for Nigeria to remain competitive in the global oil trade, it has to seek out new markets for its crude while noting that although the country has about the best crude in the world, it has been unable to negotiate good deals from buyers.

“We have the best crude in the world but we have not been able to negotiate good deals with those who have plants to continue to buy from us. The United States can get its oil from Venezuela because we are in the same geographical belt and their oil is the same as ours. So we have some work to do in terms of our outlets. The simple logic is that if you have the same product like your neighbour and your neighbour’s own is cheaper, buyers will go to your neighbour,” he said.

Ukpong further advised that while the government applies every marketing technique possible to ensure that the country still have buyers of its crude in the short run, government must in the long term develop the nation’s manufacturing sector with a view to ensuring that most of the crude production are consumed internally.
by Juliet Alohan
Source:The Leadership
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