Nigeria plans budget cuts as currency and economy fall victim to oil price slump

Nigeria’s Finance Minister Ngozi Okonjo-Iweala

Nigeria‘s currency tumbled to record lows on Tuesday, hammered by falling oil prices that have weighed on Africa’s top economy as it heads toward a costly election.

The naira slumped to 186.9 to the U.S. dollar, extending a slide that has shaved 15% off its value this year, prompting the Central Bank of Nigeria to run down reserves in a bid to defend the currency. Oil and natural gas fuel almost all of Nigeria’s exports and 80% of government revenue, according to the International Monetary Fund.

As Brent Crude prices have slipped 40% since June, to $68 a barrel, economists fear weak oil prices may prevent Nigeria from hitting the 7% growth the IMF has forecast for this year.

Nigeria is planning spending cutbacks next year as falling oil prices eat into the government’s revenue, Finance Minister Ngozi Okonjo-Iweala said.

The minister will propose to lower expenditure by 6 percent to 4.66 trillion naira ($27 billion) in the 2015 budget by tightening rules on foreign travel and raising taxes on private jets and luxury cars, Okonjo-Iweala said. Those plans are based on a benchmark oil price of $73 a barrel, down from $77.5 in this year’s budget, she said.