The International Monetary Fund (IMF) has predicted dwindling oil revenue for Nigeria and other oil-producing countries in Sub-Saharan Africa.
The Washington-based financial institution noted that the transition from fossil fuels to cleaner energy and the volatility of oil prices will be two significant determinants when it comes to oil revenue.
In the recent report titled “Savings from Oil Revenues Could Help Africa’s Producers Manage Price Swings,” and published by the IMF, the institution noted that oil exporting countries in sub-Saharan Africa should target buffers of around 5 to 10 percent of gross domestic product to manage large swings in oil prices.
In other words, Nigeria and other concerned countries in Sub-Saharan Africa would need to maintain annual fiscal surpluses of at least one percent per annum over a 10-year period.
The International Monetary Fund (IMF) stated that oil exporting countries in sub-Saharan Africa should engage in massive savings of oil revenue as it will help them manage price swings.
Investors King understands that oil prices have seen huge volatility in recent times.
The Bretton Woods institute noted that oil prices have fluctuated between $23 per barrel to peak at $120 over the last two years. This is evidence of the uncertain nature of oil revenue. However, most oil exporters in the region haven’t accumulated enough savings to insure against unpredictable oil price changes.
It added that sovereign wealth funds in sub-Saharan Africa hold assets of just 1.8 per cent of gross domestic product, compared to 72 per cent in the Middle East and North Africa, forcing countries to borrow or draw down financial assets whenever oil prices fall.
The IMF also noted that revenue from oil could drop sharply by a quarter in 2023 and by half in 2050.
Moreover, as countries transition to low-carbon energy sources, oil revenues could sharply decline. By 2030, oil revenues in the region could fall by as much as a quarter and by 2050, by half. Building buffers now would help the region’s oil exporters navigate the transition toward clean energy while managing oil price fluctuations,” the report partly read.