COMPARING VENEZUELAN AND NIGERIAN’S ECONOMIES: AS LOW CRUDE OIL PRICE HURTS OIL DEPENDENT ECONOMIES!
COMPARING VENEZUELAN AND NIGERIAN’S ECONOMIES: AS LOW CRUDE OIL PRICE HURTS OIL DEPENDENT ECONOMIES!
By:
Nurudeen Dauda
June 9, 2016
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Venezuela is the fifth largest while Nigeria is the sixth largest OPEC member by production quotas. Both Venezuela and Nigeria are Oil as well as import dependent economies. Both countries have been badly hit by a collapse in global oil prices from $115 in June, 2014 to as low as $27 per barrel in January, 2016. However, It is “logical” rather than “ironic” that when fuel prices in the “none” oil producing countries have reduced due to “low” crude oil prices in the “World market” it has on the other hand, increased among the oil producing countries. If crude oil price is “high” at the world market oil producing countries will have “Surplus incomes” due to “huge receives” from sales of crude while none oil producing countries will have “Deficits” due to paying “huge” prices for crude oil and “vice versa”. While none oil producing countries are “rejoicing” with “low” crude oil prices the oil producing countries are faced with difficulties. Hey it is economics not magic!
INCREASE IN FUEL PRICES: President Nicolás Maduro increased Fuel price with 6,000-percent. Venezuela has been badly hit by a collapse in global oil prices. The increase is the first in 20 years. Nigeria on the other hand has increased its fuel price from N86 to N145 (68%). Nigeria imports almost 95% of its refined products for domestic needs and with the recent pipelines vandalism the four refineries that have been revived few months ago are terrible affected.
TOTAL POPULATION: Nigeria has about 180million people while Venezuela has- 25million. TOTAL DAILY CRUDE PRODUCTION: Nigeria produces 2.2 million barrel while Venezuela produces-3.08million barrel per day. TOTAL PROVED RESERVES: Nigeria has- 36billion barrel while Venezuela has-75.59billion barrel proved reserves. TOTAL CRUDE OIL DAILY CONSUPTION: Nigeria consumes about -270,000 barrel per day (42m liters at 159 per barrel) while Venezuela consumes-530,000 barrel. FOREIGN RESERVES: Venezuela has $12.731billion in its reserves while Nigeria has $27.3bllion in its foreign reserves.
INCREASE IN GAS PRICES: President Nicolás Maduro increased gas prices more with 1,300%, That is the equivalent of about 10 cents per liter, or 38 cents per gallon (premium gas is 60 cents per liter now), a price that drivers outside. “I used to pay five bolívars to fill my tank — now it will be 200 or 300,” lamented Juan Olivera, a cabdriver. He said he would pass the additional cost on to customers, and worried that the increase could exacerbate inflation, already expected to be 720 percent this year. “Now everything will go up, and so will our crisis,” Mr. Olivera said. Most Nigerians do not use cooking gas but Kerosene and diesel whose prices have increased from N150 a litre to N165 (10% increase) and N130 a litre to N170 (40% increase).
INFLATION RATE: Venezuela’s central bank published economic statistics January 15 for the first time in many years, confirming that inflation had reached triple digits and closed the third quarter at 141.5% on an annual basis. As of December 2014, the last time data was released on inflation it was 68.5 percent. Inflation in Venezuela which skyrocketed to 141% from 68.5 shows 72.5% increase. In Nigeria Inflation rose from 8.6% before the collapse of crude oil prices to now 13.7 % which shows 59% increase.
SOURCES OF REVENUE: Venezuela depends on oil for 96% of hard currency revenues. Oil crash hurts Venezuela the most .The average price for its basket of oil and refined products fell this week to $24.38, the lowest level in more than 12 years. The oil crisis has put a serious strain on Venezuela's finances. Crude is the main source of export revenue for the Latin American country, which has the world’s largest oil reserves. The 70 percent drop in oil prices since mid-2014 has deprived Maduro’s government of the funds it needs to pay for imports, fund social programs, and service its debts. Nigeria as an oil dependent economy also of which about 90% of its foreign exchange earnings comes from the sales of crude oil. Crude oil has been the major resource of revenue to the Nigerian government from the early seventies to date.
VALUE OF CURRENCY: Venezuela's currency has been described as a currency worthless than a penny; Venezuela's currency, the bolivar, has plummeted at a breathtaking pace. A year ago, one dollar equaled 175 bolivars. Now a dollar is worth 865 bolivars. Nigerian currency on the other hand was devalued officially two times from N165 to $1 to N197 to $1 in 2014 when the crude oil prices began to collapse. President Buhari has refused to further devalue the naira officially. However, Naira has not been devalued official under president Buhari but in the parallel or black market the naira is sold at above N320 to $1. It is important to note that, the value of every country’s currency is determined by its economic strength.
FOOD CRISIS: Spiking prices and widespread shortages for even staples have driven discontent in Venezuela. “A lack of hard currency has led to scarcity of intermediate goods and to widespread shortages of essential goods — including food — exacting a tragic toll,” Werner said. “Prices continue to spiral out of control.” Venezuelans are bearing the brunt of the economy's problems. The government can't pay to import basic food items like milk, flour and eggs, leaving many supermarkets with empty shelves. Food shortages -- along with lines lasting several hours in hot weather -- are a major source of the social unrest in the country."There are no eggs, there's no milk," says Dallen, who frequently travels to Venezuela. "It's getting worse." Food prices have also skyrocketed in Nigeria, foods such as: Rice, wheat, tomatoes, sugar, flour, maize etc., due to our over reliance on importation.
May God bless Nigeria!