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The International Monetary Fund (IMF) has said Nigeria and other oil exporting countries in the Sub-Saharan African countries spend more when oil prices are high, hence find it difficult to save against oil price shocks.
The Fund, therefore, advised the concerned countries to target buffers of around five to 10 per cent of gross domestic product to manage large swings in oil prices.
In a report entitled: “Savings from Oil Revenue Could Help Africa’s Producers Manage Price Swings”, the Fund said for many countries, this means they will need to maintain yearly surpluses up to one per cent yearly over 10 years.
“As noted in our latest regional economic outlook, oil prices have fluctuated from lows of $23 per barrel to a peak of $120 over the last two years, resulting in highly uncertain revenue in oil-dependent economies,” the Fund said.
It said most oil exporters in the region haven’t accumulated enough savings to insure against unpredictable oil price changes. In fact, sovereign wealth funds in sub-Saharan Africa hold assets of mere 1.8 per cent of gross domestic product-compared to 72 per cent in the Middle East and North Africa -forcing countries to borrow or draw down financial assets when oil prices fall.
