Nigeria, others need $100/barrel oil to balance budgets—Report

Emerging economies reliant on oil exports, including Nigeria, Angola, and Ecuador, face increasing financial pressure as oil prices hover below $100 per barrel, according to a recent report by Reuters.

These countries, which depend heavily on oil revenues to balance their national budgets, are particularly vulnerable to price fluctuations.

“Following the oil price crashes of recent years, Saudi Arabia, along with other Gulf nations, such as the United Arab Emirates, has sought to diversify its economy and nurture local debt markets,” Reuters reported.

“JPMorgan noted, however, a price drop could force it to further scale back megaprojects such as the $500 billion city-of-the-future, NEOM.

“For poorer producers, such as Angola, Ecuador and Nigeria, lower prices would be more damaging. Most rely on oil for dollars, and need prices near $100 per barrel to balance budgets.”

But David Rees, senior emerging markets economist at Schroders, explained that these nations, with limited reserves and high debt levels, noting that “They don’t have any savings to fall back on.”

According to Rees, poor nations such as Nigeria may face worsening financial instability if oil prices fall further.

“If you get a big hit to your key revenue, those kinds of big coverages of debts just get worse and worse,” Rees said.

The report also added that despite ongoing reforms in Nigeria, including fuel subsidy removals and foreign exchange policy changes, and Angola’s debt reduction efforts, the declining oil revenues have led to investor hesitation.

Razia Khan, head of research for Africa and the Middle East at Standard Chartered, noted that “when oil prices face pressure, investors tend to paint all oil-producing countries with the same brush.”