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African OPEC producer Nigeria will have to prepare to diversify its budget revenues as oil and gas will not be its main source of revenues for much longer, according to Ngozi Okonjo Iweala, a Nigerian economist serving as Director General of the World Trade Organization (WTO).
“We need to start preparing now for a time when our oil and gas will no longer serve us as the main sources of revenue,” Iweala said at the Nigerian Governors’ Forum in Abuja this week, as carried by local media.
Nigeria has depended on the oil and gas sector for 90% of its export revenues and for 85% of government revenues in recent years.
Yet, the country has failed to capture the upside of soaring oil prices after the Russian invasion of Ukraine as investments in the Nigerian oil industry are drying up, and oil production is well below Nigeria’s quota per the OPEC+ agreement.
Addressing the governors’ forum, Iweala told the incoming governors of Nigerian states, “It is important that you governors start now to diversify your revenue sources. We ought to be seeking to double our growth rate and sustain that higher growth until we attain upper middle-income status.”
At the end of last year, the non-oil sector was running the economy of Africa’s largest oil producer, Finance Minister Zainab Ahmed said earlier this year. In the third quarter of 2022, the ICT and agricultural sectors contributed much more to the economy than oil and gas, whose contribution was just 5.66%, the minister added.
Currently, Nigeria is producing 1 million barrels per day (bpd) less than it can produce, the country’s federal government estimated last week.
The government cited a lack of investments, a shortage of funding sources because of the energy transition, and insecurity among the factors driving the much lower output compared to production capacity.
By Tsvetana Paraskova for Oilprice.com
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Tsvetana is a writer for Oilprice.com with over a decade of experience writing for news outlets such as iNVEZZ and SeeNews.