Organisation of Petroleum Exporting Countries (OPEC) has named Nigeria, Angola, Venezula, Azerbaijan, and Russia as the five oil exporting countries most hit by falling currency value.
Explaining the impacts of recession on the global oil market, OPEC said the countries were picked among several others as showing serious effects of fall in currency value, as governments were forced to devalue their national currencies in order to stem the rapid outflow of foreign reserves.
OPEC said low oil prices are wreaking havoc in oil exporting economies and on their national currencies, stating that depreciation in the currency value is common in the in oil exporting countries, be it the Venezuelan Bolivar, or the Russian rouble.
‘’In most cases, the scenario is similar: over the past decade, oil exporting countries used excessive revenues from oil to expand public services, or simply pursue populist policy in order to buy political stability.
“Once oil prices started to fall, the budgets did not shrink accordingly, which created a wide gap between the oil revenues and swelling fiscal demands,’’ OPEC said.
‘’An unwanted consequence is almost always the rise in inflation and household prices, along with a decline in living standards and stalled economic growth,’’ it added.
Impacts of the falling currency value on each of the five countries were detailed down by the oil cartel body.
For Nigeria, Africa’s largest economy was hard hit by the falling oil prices. The national currency, the naira, dropped against the dollar by more than 50 per cent over the past year.
On January 20, the Federal Government requested $3.5 billion loan from the International Monetary Fund(IMF) and the African development Bank to plug its $15 billion budget gap.
Nigeria’s oil revenues are expected to fall by 70 per cent in 2016, while the hard currency reserves almost halved from $50 billion to $28 billion and the state’s emergency fund went from $2 billion in 2009 to $2.3 billion currently.
Global oil prices have fallen sharply over the past seven months, leading to significant revenue shortfalls in many energy exporting nations. From 2010 until mid-2014, world oil prices had been fairly stable, at around $110 a barrel. But since June prices have more than halved.
The reasons for this change are weak demand in many countries due to insipid economic growth, coupled with surging US production. Added to this is the fact that OPEC is determined not to cut production as a way to prop up prices.