Economic ill winds hit Nigeria

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LAGOS, March 22 (AFP): After months of denial, authorities here have finally acknowledged that slumping oil income and a depreciating currency have taken a toll on Nigeria in the current global economic meltdown.
The general perception at the end of last year was that Nigeria had been only slightly affected by the world finance crisis. But the contagion effect has become increasingly evident.
President Umaru Yar'Adua last week signed into law the 2009 budget "with a clear appreciation of the seriousness of the challenges" the nation faces.
Finance Minister Mansur Muhtar said the country had so far managed to weather the storm, "but going forward is going to be (on) a very turbulent turf."
Oil price volatility has been the major source of external shock on the economy of Nigeria, a regional player accounting for 60 per centof west African gross domestic product (GDP) and the world's eighth largest oil exporter.
"In general the economy is very vulnerable due to the drying up of liquidity and collapse of oil prices which have put pressure on the currency," said Veronica Kalema, an analyst with the London-based Fitch Ratings.
Crude oil sales account for more than 90 per centof Nigeria's income.
"Oil prices have been the biggest shock for Nigeria, followed by the drying up of international capital flows to emerging markets," said Kalema.
Nigeria benchmarked its budget on a 45-dollar-per barrel of crude this year. While oil prices recently plunged well below that figure, they have been climbing slowly and the country still seems to be relatively well-placed to absorb the downturn.
"Nigeria has saved oil windfalls and has better reserves from which it can draw down. That makes it better prepared," said Kalema. World Bank managing director for Africa Ngozi Okonjo-Iweala, herself a Nigerian, said turning to the excess crude account (ECA) is now unavoidable.
"The reason for setting up the ECA was precisely for a rainy day like this, when oil prices fall below the average level (that) one might expect will prevail over time," she said.