As threats of global recession emerge and oil prices dive, Nigeria is dusting off its diversification toolkit to bolster its economy against hard times.
The country of 200m people is battling challenges on many fronts as it is buffeted by a sudden and dramatic drop in oil prices and a global slowdown resulting from the coronavirus outbreak in key economies, including some of its biggest trading partners. Stocks have fallen to four-year lows and reserves continue to plummet. In late March, the Central Bank of Nigeria "adjusted" the currency, but denied it was a devaluation.
As the global environment worsened in March and the number of virus cases started to grow in Nigeria itself, the government of President Muhammadu Buhari reacted swiftly to the immediate challenges. The oil price of $57 per barrel on which the 2020 budget is based, fell to $30 in mid-March as the country became a victim of a price war between major oil producers, notably Saudi Arabia and Russia.
The International Energy Agency has described the situation in the oil sector as being one of "extraordinary uncertainty". The early slowdown in China in 2020, the epicentre of the first virus outbreak, meant Nigeria has been sitting with unsold cargoes. Its woes are compounded by the fact that the country is a high-cost producer, with a barrel of oil costing about $30 to produce while Saudi Arabia can produce the commodity for about $5 per barrel.
The government has also cancelled its plans to borrow $22.7bn from foreign institutions to support various national plans. The minister of finance, budget and national planning, Zainab Ahmed, said the government would instead prioritise its expenditure to focus on capital projects that would create jobs and on projects to improve the ease of doing business in the country. Everything else would have to wait until further notice. It also approved reductions in the capital budget by 20%, and recurrent expenditure by 25%.
Flights to more than a dozen overseas destinations were cut to prevent the spread of the virus, which has come to Africa through travellers from affected countries elsewhere.
Nigeria has battled to emerge from the aftershocks of the 2016-17 recession, precipitated by a severe long-term decline in the oil price from 2014 coupled with lacklustre economic policy, serious infrastructure deficits and persistently weak consumer demand.
Buhari, who now faces the possibility of the second recession of his tenure, has admitted the situation is challenging. "The economy is the most delicate and...