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Economic recession and its effects on the oil industry

Some attribute the recession to the drop in the oil prices in the global market, while some believe the activity of the militants and pipeline vandals in the Niger Delta region of the country which caused significant reduction in the volume of crude oil production was responsible for the recession. The current economic situation in Nigeria was primarily caused by insufficient foreign exchange forex in the Central Bank of Nigeria CBN to fund imports.

How petroleum sector drove Nigeria into economic recession

This with its enormous effects on the economy caused the recession. In a report by NBS, Nigeria received 95 per cent of its export earnings and 70 per cent of government revenue from the oil sector. Bloomberg Terminal According a tweet posted by CNNMoney, Nigeria was estimated as the 3rd world fastest-growing economy in 2015 with an estimate of 7 per cent growth, behind only Qatar 7. What now led to the recession? When the global crude oil prices dropped, the forex reserves also dropped due to over reliance on the sector, but the nation failed to devalue its currency which led to the shortage of forex earnings to fund imports.

This, however, made investors struggle to get forex for their imports. Given that the nation could not explore other investment opportunities for the production sustainability of the economy, the FPI and FDI investors got frustrated over the shortage of foreign exchange to pay for raw materials and machines, so they eventually left the market. When that happened, the value of production, which is the major function of GDP, began to fall.

The investors who decided to stay had to pay significantly more for these imports because of the high cost of production materials.

Since then, the economy has witnessed a hiccup in its production capacity, thereby causing a steady drop in GDP. The economy recorded negative growth in the first quarter of 2016, which led the economy into recession for the first time since a full-year recession in 1987.

Apparently, the reason for the recession was not of the fall in oil prices or poor saving culture as many perceived, but by the lack of sound economic policy to create alternative foreign exchange earnings such as the non-oil exports.

These problems can be solved with policies that make the market attractive to foreign investors.

“The real reasons behind Nigeria’s economic recession”

These policies could include: Once these actions are taken to provide a good economic environment, long-departed economic growth will come back again. Reach me on Twitter: I stepped up in my journalism career with training by the Bloomberg Media Initiative Africa BMIA to become a financial, economic and business journalist.

  1. These policies could include. Once these actions are taken to provide a good economic environment, long-departed economic growth will come back again.
  2. The current economic situation in Nigeria was primarily caused by insufficient foreign exchange forex in the Central Bank of Nigeria CBN to fund imports. The investors who decided to stay had to pay significantly more for these imports because of the high cost of production materials.
  3. Also, Vice President Yemi Osinbajo disclosed that the unparalleled volatility in the global oil market has impacted negatively on the Nigerian economy.

I report economic data, trading sessions from Nigeria Stocks Market and other key financial institutions. I am a passionate young man who has determined to keep telling the stories behind public data. Articles are published in a spirit of dialogue, respect and understanding. If you disagree, why not submit a response? To learn more about becoming a Commonwealth Correspondent please visit: