Why Nigeria is not benefiting from a higher oil price - CNBC Africa

Why Nigeria is not benefiting from a higher oil price

Western Africa

by CNBC Africa Reporter 0

Why Nigeria is not benefiting from a higher oil price. Photo: Flickr.

As global oil prices continue to fluctuate, the concern is that Nigeria will not be able to benefit from the rally until it resolves the Niger Delta attacks, according to Kola Karim, CEO of Shoreline Group.

This comes in light of Members of the Movement for the Emancipation of the Niger Delta (MEND) agreeing to meet with the Nigerian government.

"I think its good news for Nigerians… having government from their side putting forward this team to come to the table - everyone has a grievance - let’s sit down and talk about it," said Karim.


Force majeure

The West African country has had companies declaring by law that they are unable to commit to their contracts due to unforeseen circumstances, explains Karim.

"It has been hugely negative, if you think about it force majeure is being declared left-right and centre - so you can imagine even if oil goes to 70 dollars, there is no benefit to Nigeria, the Delta, to the state and to companies," said Karim.

His concern is how long Nigeria’s economy can survive with this level of destruction but if an agreement is met soon there is still hope for Africa’s largest economy.

"Every time that is gained is time that is good for the industry and good for a lot of the repair work that is taking place in making sure the reoccurrence does not come into play again - the focus point is the engagement, getting all sides around the table in making sure there is discussion around how we get an effective result and proper monitoring in how to keeping this peace."

Karim reckons Nigeria could make a recovery and leverage off the spike in global oil prices if it is resolved quickly and makes necessary repairs to continue production.

"The good news is this, [the] oil price is globally trending up, so Nigeria can actually jump on that train by putting these repairs into place and production commences in fairness, that would help jumpstart the revenue stream again and pushing the economy in the right direction, but if the situation is not resolved and there is no solution going forward, Karim says unfortunately we will see that recession faster than we think."