Dwindling Global Oil Prices: Curse or Blessing in Disguise for the Nigerian State?

Abstract

The study investigated the recent turmoil in global oil prices. The historical research method/approach was adopted with the use of secondary sources of data. The oil and gas industry is strategic to national development and growth of the Nigerian economy. In the 1940s up to the early 1960s, Nigeria relied heavily on the agrarian economy or agricultural produce as the mainstay of the Nigerian economy. In those good old days, there was healthy rivalry among the three main regions of Nigeria; the western, eastern and northern regions with each region producing agricultural products for which they have comparative advantage. Then the Nigerian economy was economically vibrant with high level of employment, high standard of living and low cost of living. With the discovery of oil in commercial quantity at Oloibiri in present day Bayelsa State in 1956; oil became the mainstay of the economy. As a mono-product economy, since the discovery of oil, there has been neglect of other sources of revenue over the years with heavy reliance on crude oil revenue. Annual budgets have always been predicated on oil revenue projections. The recent discovery of shale oil by the United States of America could be viewed as a turning point, necessitating a downward demand for crude oil in the international market coupled with over production by Saudi Arabia as well as the fall in demand by Asian countries like China which has led to the drastic fall in global oil prices. As of the time of writing this paper, Nigeria’s crude oil hit $80 per barrel for the first time since it fell drastically in 2014. The price fell to as low as $28 per barrel at the beginning of 2016. Many observers are of the view that this is a lesson for Nigeria. There are mixed reactions as to whether the current situation is a curse or blessing for the Nigerian State. The authors are of the view that the dwindling global oil prices could be a blessing in disguise rather than a curse for the Nigerian State. It is recommended that government at all levels should urgently diversify the Nigerian economy from oil to nonoil sectors such as solid minerals, agriculture, tourism, textiles and steel industries. The time to diversify the Nigerian economy is now and enough of lip-service by various past governments. In the same vein, government may have to be prudent and eschew all forms of financial profligacy. There is a need to drastically prune down the bloated size of government if Nigeria is to achieve sustainable economic development.