By Moses Patience Chat
The International Monetary Fund has suggested measures that Nigeria and other oil-producing countries need to put in place to resolve their low crude oil production challenges.
This was revealed in its April 2023 World Economic Outlook, with the theme “A Rocky Recovery,” where IMF stated that countries producing fossil fuels need structural adjustments in order to manage the impact of declines in fossil fuel production.
The Fund also said that countries at risk of declining fossil fuel output need to improve public finances and the quality of their institutions, diversify their economies, set up sovereign wealth funds, and facilitate the reallocation of production factors.
It also highlighted some important steps that fossil fuel producing countries should act upon like ameliorating the business environment to attract investment in new, productive, higher-value-added sectors, modernizing infrastructure and attracting foreign direct investment in research and development, and improving the human capital stock of the labour force by investing in education.
According to the report, “the pace and direction of the clean energy transition as well as the price outlook depend on the policy mix. This creates great uncertainty in countries that produce fossil fuels.
“If fossil fuel prices decline because of a climate policy mix that works mostly through the demand side, high-cost producers will need to shut down production.
“If those prices instead rise based on a climate policy mix that relies on supply cuts, local production declines will depend on domestic policy decisions. Climate policy certainty, at the country and global levels, could make adjustments more predictable and less costly.”