TheCable

Ngozi Okonjo-Iweala, minister of finance and coordinating minister of the economy, has warned that oil prices are likely to stay low for a long time after falling more than 40 percent in the past year.

Brent crude has fallen about 42 percent over the past year. Although it has increased 11 percent so far this year and is currently at around $60 a barrel, it probably won’t recover to the 2011-2013 level of more than $100 a barrel, she opined.

“You forecast at your own risk, but it seems to me that we should be regarding this as a permanent shock,” she said on a panel discussion in Washington near the end of the International Monetary Fund’s spring meetings.

“Nigeria has responded to the oil rout by cutting expenditures and with revenue-raising measures including a tax on luxury items such as yachts. Longer term, the government seeks to diversify the economy beyond oil.

“We should prepare our economies for that eventuality.”

Asked where she expected prices to be in 12 months, Okonjo-Iweala said $60 to $70 a barrel.

The comments highlight a growing worry among oil-producing nations ahead of an important meeting of the Organization of Petroleum Exporting Countries (OPEC) in June to be held in Vienna.

The OPEC meeting is likely to be tense after Saudi Arabia, the world’s largest oil exporter, boosted production to the highest in three decades in March, with a surge equal to half the daily output of the Bakken formation in North Dakota.

OPEC nations such as Nigeria and Algeria are suffering more than Saudi Arabia and other Gulf countries the drop in oil prices because they built smaller foreign-exchange reserves.

While the IMF projected last week that low oil prices should boost global growth, it warned that the combination of a strong U.S. dollar and depressed crude market could bite hard in emerging economies that rely heavily on oil exports.