The international market is already feeling the hit of the virus spread with major markets witnessing massive sell-offs as investors take out their money to get a proper clue on what how far the impact of the pandemic could go.
In a bid to push up the price of oil, members of the Organization of Petroleum Exporting Countries (OPEC) and its allies, resolved to enact a 1.5 million barrel per day cut to support an already 2 million barrel per day that had been enacted before.
The global market witnessed a new round of heightened panic after two of the World’s largest oil exporters (Saudi Arabia and Russia) failed to reach an agreement on the cut, but rather Saudi Arabia started an oil war but pumping in more oil while still slashing its price to attract buyers.
Back home in Nigeria Back home, Africa’s largest economy is already having a hard time being that crude oil sales from where it gets over 85 per cent of its dollar liquidity, and over 70 per cent of its entire revenue, is trading below the $57 mark which it pegged its budget.
Falling oil prices do not align well for Nigeria as it would make the government handicapped in carrying out its planned expenditure and also put pressure on the Naira.
It can also worsen the country’s trade balance and current account as oil constitutes a major chunk of the country’s export.
But it isn’t a 100 per cent bad for the Nigerian economy if some measures are enacted to help in reducing the impact of the falling oil price on the country, according to analysts at Investment and financial services firm, Investment One.
The investment firm outlined four major strategies that the Central Bank can apply to cushion the outflows witnessed in the market by foreign investors.
This strategies the firm noted includes Increase interest rate for Foreign Portfolio Investors (OMO stop rates); placing more items on ban from accessing the official FX market; the use of the nation’s reserves to defend up to another devaluation trigger point of US$30billion; and lastly devaluing the currency to bring confidence to the market.