The Central Bank of Nigeria (CBN) has indicated that the recent increase in oil prices does not imply higher revenue nor does it improve the external reserves of the Nigerian economy despite the fact that rising oil price is usually considered to be beneficial to a major oil exporter like Nigeria.
This was disclosed by the Deputy Governor of the CBN, Edward Lametek Adamu, at the last Monetary Policy Council meeting held by the CBN.
He stressed that inflation remains a major concern for global policymakers and that the war’s adverse consequences are already being felt in Nigeria.
Adamu stated that commodity prices are rising fast as investors embrace gold, and global demand for crude oil appears to outstrip supply, owing to the sanctions on Russia.
However, he believes that Nigeria would not reap the benefits of a rising oil price, stating “crude oil prices are high and could remain so for some time. Unfortunately, this is neither translating to more revenues for government nor increased accretion to the country’s external reserves.”
He also warned that oil earnings would be offset by fuel subsidies and increased production costs.
“Under this condition, the cost of subsidy on PMS will increase, further limiting the fiscal space for supporting growth. Other downside risks to growth emanating from the war in Ukraine include rising gas prices as well as the cost of some intermediate goods. Manufacturing and agriculture could take a hit from this development,” he said.
He added. “It appears to me that domestic output recovery is severely threatened. In effect, the CBN cannot at this time relent in supporting growth using monetary policy and development finance interventions which have so far proved to be among the economy’s critical safety nets”