Nigeria, Algeria may face further oil export decline, says report

The latest report from a global consulting firm, Frost & Sullivan has predicted that Nigeria and Algeria may face further decline in crude oil exports going by the gluts in the international market.

Besides, the report stated that the economic indicators of emerging Middle Eastern and African (MEA) countries for the second half of 2015 pointed to a mixed bag of possibilities and challenges.

“While growth in Saudi Arabia, the United Arab Emirates and Egypt will pick up pace, Algeria and Nigeria will continue to grapple with the decline in exports and depreciation in currency, as per the consultancy,” it stated.

Emerging Middle East and Africa, the second half of the year presents economic and industry indicators for Saudi Arabia, UAE, Egypt, Algeria and Nigeria.

The study provides estimates for 2015, a short-term forecast for first quarter 2015 to fourth quarter 2017, and medium-term forecasts from 2016 to 2018 for select indicators.

Senior Research Analyst, Emerging Market Innovation at Frost & Sullivan, Krishanu Banerjee, “Declining oil prices multiply the significance of diversification. Therefore, the development of non-oil industries like agriculture, banking, finance and tourism will become central to economic progress.”

Saudi Arabia and the UAE will withstand the pressure of sinking oil prices owing to strong non-oil sector performance, the study highlighted, adding that high public spending on education, health care, transport and water infrastructure will spearhead the two economies. The expansionary Purchasing Managers’ Index of both countries will brighten business and consumer sentiments throughout 2015.

However, the depletion of Saudi Arabia’s foreign reserves will be a cause for concern in the last quarters of 2015, it further stated.
As a major oil importer, Egypt will stand to gain from low oil prices, although financial aid from Middle Eastern countries is likely to drop in H2 2015 as oil revenues scale down.

“Ongoing political tension in the country will heavily dampen prospects in the tourism sector. Largely reliant on earnings from oil and gas exports, Algeria and Nigeria will reel from low oil prices,” the study said.

The Algerian Government’s investments in infrastructure as well as public welfare and subsidy schemes will remain subdued in second half of 2015. Weak private consumption and an ongoing power crunch signal a bleak outlook for the second half of 2015 in Nigeria as well.

“Diversifying the range of export products is an immediate requirement that MEA countries must address to guard against price volatility and strengthen their economy in the immediate future,” Frost & Sullivan said.

Oil prices have been plunging since last year June. From $115 per barrel, oil prices dropped to less than $50 per barrel due to record over production and weak global demand.

The entry of Iran and slowdown in the Chinese economy is likely to put further downward pressure on oil prices.