How Nigeria Can Benefit From Low Price Of Crude Oil – Don | Independent Newspapers Limited
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How Nigeria Can Benefit From Low Price Of Crude Oil – Don

Posted: Jul 7, 2015 at 12:04 am   /   by   /   comments (0)

Stories by Obas Esiedesa, 


A Professor of Financial Economics at the University of Uyo, Dr. Leo Ukpong, has said that Nigeria could only benefit from low price of crude oil at the international market if it develops its manufacturing sector using its crude as energy source for factories.

He said the country, which is blessed with a large population, has the biggest market on the African continent and has the capacity to utilize its crude production internally.

The professor, who stated this at the Emerald Energy Institute of the University of Port Harcourt, noted that falling crude price would continue to put pressure on the Naira as long as Nigeria continue to depend on crude export as its source of income.

Ukpong explained 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.

According to him, “It is easier for Nigeria to see rise in oil price as a blessing because it means we are selling our crude at highest price. Then you have more money to do a lot of things and sometime stupid things too. Spend it recklessly.

“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 means that you import oil cheaply and the price of 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 way we can change that is to start manufacturing the goods we need to meet our own demand. 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,” he added.

Ukpong stressed that at the “point where we can manufacture what we need, we will begin to enjoy the benefit of drop in oil price and also rise in oil price. Then we will have the best of the two situations.”

He pointed out that Saudi Arabia is not feeling the impact of the fall in oil price much “because it manufactures most of what is consumes locally even up to food.”

While allaying fears that the lack of investment in exploration has led to reduced proven oil reserves, he noted that all that was required to increase reserve was the introduction of new technology.

“Some people have been concerned that our reserve is falling but that is not a problem because we have more reserve that we even don’t know of. All you need to discover your reserve is new technology.

“What drove the oil price down was technology that 20 years ago nobody knew was there until they discovered that they could get oil that they get 30years ago.”

He said for Nigeria to remain competitive in the global oil trade, it has to seek out new markets for its crude.

“The oil in Saudi Arabia and the one in Nigeria are two different oils. The market we service is not the same that Saudi Arabia services. Saudi Arabia today rely more on Chinese market.

“We have the best crude in the world but we have not been able to negotiate good deals with those who have the plants to continue to buy from us. The US can get its oil from Venezuela because we are in the same geographical belt and their oil is the same with us.