Dr Carole Nakhle
Nigeria has long been battling structural problems, particularly in its economy and oil sector. The Covid-19 pandemic and subsequent economic shocks only magnified them.
The country has not learned how to escape the resource curse; it remains vulnerable to the vagaries of global oil markets. Africa’s largest economy is now facing another deep recession only shortly after having recovered from the previous price collapse in 2014.
Nigerian Oil Production (mb/d)
Data Source: EIA
The Nigerian government has failed to reach its ambitious oil production milestones, and investment was struggling even before the pandemic. The looming threat of peak oil demand and the shrinking market will claim victims among oil producers. Nigeria, as a high-cost producer, could be among those who go first.
Today’s low oil prices ought to incentivize the government to pursue much-needed economic reforms and improve the investment climate in the oil sector. However, the urgent need to raise revenues could prevent the government from pursuing this rational path. It also risks endangering the country’s relationship with OPEC.