Nigeriaâ€™s government, which relies on oil for about two-thirds of its revenue, sees a silver lining to the plunge in crude prices because it will no longer have to subsidize fuel, Vice President Yemi Osinbajo said. â€œLower oil prices also mean there is some advantage,â€ Osinbajo said in a panel discussion at the World Economic Forum in Davos, Switzerland, on Thursday.
The decline â€œmeans that we are not paying any subsidies, which frees up something in the order of about $5 billion.â€ Brent oil in London has dropped more than 60 percent to below $28 a barrel since November 2014, as shale production from the U.S. increased and the Organization of Petroleum Exporting Countries refrained from cutting output in the face of a global oversupply in an effort to defend market share. Nigeria is Africaâ€™s largest oil producer.
Nigeria will still face challenges in financing its budget deficit and aims to increase value-added tax and customs duty collection to help plug the gap, Osinbajo said. â€œWe think with adequate governance around budget management and around expenditure management, we can do quite a bit,â€ he said. â€œIf we are able to do those things, we might be able to come away with under $30â€ a barrel oil.