The impact of oil price fall is sinking down on producer economies as key growth parameters indicate slow-down.
The economies of Nigeria and other oil producing countries are to suffer economic slowdown in the short to medium term following the acute slide in the prices of crude oil and natural gas in the international market.
Already, the gross domestic products (GDP) of the countries have registered dips, reflecting the impact of revenue fall from crude oil and associated activity lull in the industry as commerciality profile of major exploration and production projects also drops.
According to the International Monetary Fund’s (IMF) 2015 World Economic Outlook report, energy-exporting countries, including Nigeria, could see about 2.25 per cent loss in economic growth annually from 2015 to 2017, compared to 2012 to 2014, due to the sharp decline in oil prices.
The new report noted that the recent drop in commodity prices had been accompanied by pronounced declines in real gross domestic product (GDP) growth rates, much more so in commodity-exporting countries than in other emerging markets and developing economies.
According National Bureau of Statistics, Nigeria’s GDP growth rate plunged to 2.35 per cent in the second quarter of 2015, down from 3.86 per cent in the first quarter and 5.94 per cent in the fourth quarter of 2014. Global benchmark Brent crude, which have continued to trade below Nigeria’s budget benchmark price of $53 per barrel in recent weeks, dropped to $47.47 per barrel at present. “With a weak outlook for commodity prices, particularly for energy and metals, growth in commodity-exporting emerging and developing economies could slow further over the next few years,” the IMF stated.
It said an overall “weak” commodity price outlook would reduce the economic growth of all commodity exporters by roughly one per cent annually over that time.
“In exporters of energy commodities, the drag is estimated to be even larger – about 2.25 percentage points on average. Commodity-exporting economies are at a difficult juncture. Global commodity prices have declined sharply over the past three years, and output growth has slowed considerably among commodity- exporting emerging market and developing economies,” the report stated.
In the study, the IMF argued that a variety of “cyclical and structural factors” were contributing to the growth slowdown, while other factors, including reduced government spending and policy changes, had lessened the impact of the global commodity downswing.
“Nevertheless, policymakers must be realistic about growth potential in commodity-exporting economies,” the IMF said, adding that the decline in potential growth could amplify the ongoing economic slowdown.