10-02-09 The current nose-dive in the price of world oil is now impacting Nigeria's oil sector negatively. Intelligence reports indicate that the decline in oil price has created a cash crunch, which has made it difficult for both foreign and local oil workers to carry on with oil trade in the country.
The falling value of the naira, low oil price and decreasing production as a result of militancy and other factors in the Niger-Delta region are causing cash shortage in the country's petroleum sector. The sudden reduction in revenue, therefore, has left the federal government with less room to manoeuvre, amid clashing demands for scarce cash resources.

Global Intelligence firm Straffor has already warned that with cash shortage in Nigeria's oil sector, spending would be highly reduced and not spending money would risk triggering reprisal in the Niger-Delta region with militant gangs resorting to violence. Available data shows that in the last three years more than 240 foreigners have been kidnapped inthe region.
Aside this warning, Straffor has predicted 2009 as a violence year in the country as cash to tackle militancy and monitor oil pipelines thins out as a result of "cash shortage".

Straffor's warning cannot be pushed aside by Nigeria because of the recent wave of kidnaps despite President Umaru Yar'Adua administration preparedness to tackle the problem with the creation of a Ministry of the Niger Delta.
Only recently, a former petroleum minister's wife was kidnapped alongside an oil worker by gunmen. This was shortly after the Petroleum and Natural Gas Senior Staff Association of Nigeria (PENGASSAN) threatened to pull out of the region as a result of incessant kidnap of its members.

The Niger Delta region in the past produced 2.5 mm barrels of oil per day making Nigeria the number one oil producing nation in Africa, a position it lost to Angola in the recent past following the militancy problem. The region's output has reduced significantly to less than 2 mm bpd, and coupled with the great slide in oil prices from $ 147 a barrel in July, 2008 to its present level of about $ 40 has made less revenue available to the Nigerian government to tackle either violence or poverty.
This scenario has implications for the implementation of its much awaited oil and gas reforms.

At the international level, analyst and experts had warned Nigeria of a possible drastic fall in oil prices with its negative consequences on its economy when the price picked at $ 147 in July, 2008 and advised that revenue from the high oil prices should be utilised for massive investments in infrastructural, agricultural and industrial development. These experts also warn that those African oil-exporting nations such as Nigeria need to diversify their economies as well to prepare for the rainy days.
The reality of this argument for Nigeria is that it has the greatest population in Africa and energy needs grow with as economies and populations grow.

Already some African nations have reacted swiftly to these warnings and have begun to plan for alternative energy sources to oil. These alternative sources include biofuels, hydro-electricity and solar energy.
Gas, a fossil fuel that has been with Africa since oil was discovered and which was wasted for several decades especially in Nigeria, which has been ranked highest gas flaring nation in the world by the World Bank, is currently being harnessed.

The stark reality emerging from the world oil price trend is that Nigeria should stop relying heavily on the importation of fuel and put its refineries in order and to begin to seek alternatives to oil.
Economic analysts have foreseen that a continued high spending on fuel importation would result to a downward economic growth trend after all efforts to attain the present significant economic growth in the country.