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FG urged to prevent leakages in oil production

By on November 4, 2014

In view of the effects of dwindling crude oil price on the Nigerian economy, the federal government has been advised to intensify efforts at preventing leakages and pipeline vandalism, which disrupt oil production.
This, according to analysts at the Financial Derivatives Company Limited (FDC), would help increase the Nigeria‘s oil production and in turn, minimise the impact of falling oil prices on revenues and external reserves.
Analysts at the FDC, in their latest report obtained at the weekend also urged the federal government to strengthen the non-oil sector in order to boost revenues.

The report also pointed out that the Central Bank of Nigeria’s (CBN’s) monetary policy would be a very useful tool in managing the risks to the exchange rate and inflation in the country. It argued that the current restrictive policy stance of the central bank has been effective so far in achieving the central bank’s objectives.
“Although there is a strong desire for an expansionary interest rate policy to boost growth, it may not be prudent to adopt such a policy at this critical time,” it added.

However, the report noted that fiscal policy would have limited impact in curbing economic risks.
“Pending developments in the agriculture and power sectors should be carefully analysed to determine the way for-ward. Furthermore, there should be better collaboration of nation-al and regional governments in tackling the Boko Haram menace, since crimes are perpetrated through interstate and country borders,” it added.
According to the report, Nigeria‘s economic indicators have remained positive and relatively stable this year. However, it pointed out that the threats of increased risks from excess market liquidity, decreasing oil prices, changes in global monetary policies and security unrest may affect the stability of some economic variables.
“We expect the CBN to continue to pursue a contractionary monetary policy, which will help in mitigating the risks to inflation and the exchange rate.

“The security crisis can also be better managed through greater collaboration of national and regional governments,” it stated.
The inflation rate declined to 8.3 per cent in September 2014 after six consecutive months of increase. The moderation in inflation was attributed partly to an increase in food supply from the harvest season.

 

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