Atlantic Council Exclusive: Nigeria’s Finance Minister Discusses the Impact of Falling Oil Prices on Africa’s Biggest Economy

As Africa’s most populous country, its largest economy, and its top petroleum producer, Nigeria has grown about 7 percent a year for the past decade. With the expansion of the telecommunications, media, and retail sectors and a new interest in agriculture, the ubiquitous oil industry nowadays accounts for just 14 percent of the economy. The West African country’s buoyant prospects have attracted significant investments from a growing number of multinationals, including GE and Proctor & Gamble, as well as private-equity firms, including the Washington-based Carlyle Group which only last month invested in a minority stake in Nigeria’s Diamond Bank.

Leaders like H.E. Ngozi Okonjo-Iweala, coordinating minister for the economy and minister of finance of the Federal Republic of Nigeria, speak expansively of economic diversification and sustainable visions for development. The minister laid out such a program in detail in an address at the Atlantic Council in October, during an event co-hosted by the Africa Center and Thomson Reuters.

However, with hydrocarbons still making up almost all of the Nigerian exports and up to 80 percent of the government’s revenues, the dramatic fall in global oil prices—the benchmark Brent crude closed on Friday at $61.38 a barrel, down from close to $108.00 at the beginning of the year—cannot but have a major impact on the Nigerian economy. The naira is trading at record lows against the US dollar, the stock market is down by almost one-third, and expectations for economic growth in 2015 have been revised downward, as has the federal budget, pegged now to the benchmark oil price of $65.00, down from the $78.00 used earlier this year.

Moreover, all of this is happening against the backdrop of both an increasingly virulent insurgency by the terrorist group Boko Haram in northeastern Nigeria and hotly-contested national and state elections which are scheduled to take place in less than two months.

On December 19, Minister Okonjo-Iweala spoke exclusively with Africa Center Director J. Peter Pham to explain what is happening, what measures have been taken, and why it matters, not just to Nigeria, but to Africa and the world. She outlined both the economic assumptions made by the government and its priorities with respect to raising revenue and trimming expenditures. The finance minister remained confident, arguing that what is more important is not the problems which she acknowledged, but how the government reacts to them. She suggested that, in fact, the current crisis may be an opportunity to accelerate the needed shift in the Nigeria’s overall economy and noted that, even with the slashed fiscal outlook, the projected budget deficit of less than 1 percent of GDP was low by global standards.

Image: H.E. Ngozi Okonjo-Iweala at the Atlantic Council in October 2014.