THERE is understandable concern in the country about the drop in crude oil prices over the last several weeks. From a figure of $104 per barrel on August 1, 2014, the OPEC basket of prices collapsed to about $82 per barrel on October 28, 2014. The basket of prices used by the Organisation of Petroleum Exporting Countries (OPEC) is the average price of all the varieties of crude sold in the international market.
The drop of over $20 per barrel in the three months between August and October has raised justifiable fear given our overwhelming dependence on oil and gas exports for over 90% of our country's foreign exchange earnings. At a Senate committee session on Monday October 27 on the Medium Term Economic Framework (MTEF), which serves as a basis for the preparation of the estimates of revenue and expenditure for the annual budget, Dr. (Mrs) Ngozi Okonjo-Iweala, Finance Minister and Coordinating Minister for the Economy, told the committee that the Nigerian economy was facing some challenges on account of the oil price drop. She stated that The Excess Crude Account was created to cushion the economy at difficult times like this. The Minister stated however, that the Excess Crude Account had been depleted to the tune of $4.1 billion, down from $9 billion. Speaking further on the Excess Crude Account as reported in the Vanguard newspaper of Tuesday October 28, 2014 the Minister said: "... and you know we went down to $2 billion last year and then we built it up to $9 billion, and there was insistence we must share, and it came down to $2 billion, and then we built it back to $5 billion. Right now we are at $4.1 billion." Nigeria had much more funds in the Excess Crude Account, the last time the world oil price tumbled dropping from a high of $140 per barrel in July 2008 to a low of $37 in December 2008. The funds in the Excess Crude Account in 2008 helped the country weather the storm during that difficult period.
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