The sting of low oil prices has forced Nigerian president Muhammadu Buhari to seek help from the International Monetary Fund, according to Reuters. The president plans to boost spending to stimulate the economy, but Nigeria will need help from the organization to do so. The government plans to borrow up to 900 billion naira to satisfy the deficit, and authorities aim to double the deficit to 2.2 trillion naira in 2016.
The West African nation faces difficult decisions as low oil prices prove to create a greater burden on the economy. Saudi Arabia refuses to lower oil production, much to the detriment of poorer OPEC nations, but relief may come in 2016 as some analysts expect demand to alleviate oversupply. Oil prices have dipped by around two-thirds since 2014, causing oil-dependent countries such as Nigeria to suffer immensely. Nigeria constitutes Africa’s primary oil producer and relies on crude for over two-thirds of its revenue stream.
Boko Haram Threat
Buhari was left with a massive headache when he took office in 2015, especially as his predecessor, Goodluck Jonathan, failed to improve the nation’s security. Terrorist group Boko Haram has wreaked havoc throughout the land, claiming territory and killing Nigerians on a massive scale. The latest attack occurred last week, when female suicide bombers took the lives of 30 people and left 114 injured, and an additional 20 people were killed during the fighting.
Officials remain vigilant in fighting the organization, but the militants survive by going underground and recovering after encounters with forces from Nigeria and around the region. Boko Haram has killed over two thousand people while forcing two million people to flee their homes, and the Islamist group maintains its base in Nigeria. While the government may be doing everything possible to stop Boko Haram, whose brutality rivals that of ISIS, it is not enough as the deteriorating security situation disrupts economic stability and scares investors.
Nigeria’s Emerging Market Status
Nigeria was once a thriving emerging market, but some economists foreshadow investor fatigue regarding upcoming markets, and other developing countries such as Vietnam generate greater interest from international firms. Buhari’s spending plans will provide relief going forward, but the government risks falling deeper into debt and suffering under the thumb of IMF austerity plans.
Nigeria should take a cue from the Gulf States by diversifying away from oil and focusing on projects and industries that foster long-term growth over the next few decades. Nigeria will triple its capital spending in the coming years in response to the energy downturn.