HOW OTHER OIL DEPENDENT NATIONS SHIELD THEMSELVES FROM DROPPING OIL PRICE SAUDI ARABIA: Speculations are that the Saudis are behind the dropping oil price; because they want to compete with North American shale oil and gas, as well as in conjunction with the U.S punish Iran and Russia for the formers growing influence in the middle east, the latters incursions in Ukraine, and Iran/Russian support for Assad in Syria. To keep their economy running and maintain status, the Saudis increased oil production to cushion the falling price, leaving its $740 Billion foreign reserve untouched. RUSSIA: Russia has a foreign reserve worth over $750 Billion, to keep their economy running, they need oil price to remain at least $100 per barrel. Instead of cushioning the economy by support from the foreign reserve, Russia instead towed the Saudi line; they raised oil production, and raised their key interest rate from 10.5% to 17%. The increased rate is aimed at generating more income from within. IRAN: Here the Government increased tax rates especially VAT, increased oil production, is reducing the size of the Government by privatizing Government owned businesses, increased non-oil export among others. Leaving its foreign reserve of about $70 Billion untouched. Do not forget that Iran has been under UN sanctions for more than two years over its nuclear program; implying boycott of Iranian oil by many nations for the same period. NIGERIA: Had a foreign reserve of about $35.7 Billion as at Dec 11, 2014, which dropped to $35.2 Billion at Dec 18, 2014, after about $500 Million was used to cushion the effect of falling oil price in a week. Seeing that this was not sustainable, the CBN stopped cushioning the Naira by depleting our foreign reserve, subsequently the Naira dropped from N155 to N193 against the dollar. Nigeria is implementing an austerity measure that translates to increased taxation on luxury goods and services, but not the size or earnings of its Government. I found no records of increase in oil production; a common measure adopted by all the nations listed above, probably we have some magic measures we wish to adopt, meanwhile oil price is further falling, and the Naira is further loosing value. On the contrary the measures adopted by the three nations above all lead to stable currency. Note that this post is no criticism of any Government, I am merely divulging information at my disposal.
Posted on: Sat, 27 Dec 2014 23:34:55 +0000
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