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Opinion

Nigeria could slip again on oil

The recent collapse in the oil price and Nigeria's (lack of) reaction to it echoes the way the country dealt with the crisis in 2015. Repetition of the same mistakes will only cause harm for Africa's largest economy.

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When the price of oil crashes, Nigeria’s stocks usually sees a huge sell off. At the close on March 10, the country's All Share Index had fallen 4.91%, while bank stocks were down 12.5% on the previous day.

Emerging market oil exporting nations need to act fast. As well as managing the impact of a capital market hit, they need to revise budgets, tighten monetary policy, stem inflation and shore up foreign exchange to maintain some semblance of stability. Add the coronavirus pandemic and the possible fall in demand from China into the mix, and government action must be accelerated.

In sub-Saharan Africa, a number of countries hit by the oil price collapse in 2014 have better defences in place this time around. In particular, Angola and Gabon both now have IMF programmes in place, which should improve their ability to respond. But international investors remain skittish about Nigeria, given the administration's apparent inability to act when crisis hits.

In 2015, when Nigeria elected president Muhammadu Buhari in the country's first free and fair election, optimism was high and change felt inevitable.

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