Nigeria rode the wave of energy exports until it crashed in dramatic fashion. A fall in oil prices has been particularly detrimental to Nigeria, which depends on oil and natural gas for 96% of its export revenues and 80% of its government revenues. The largest African economy has seen its currency, the Naira, fall to multiple all-time lows against the U.S. dollar in recent weeks. Nigeria’s economic troubles reinforce the value of a diversified economy and caution when investing in emerging market economies. The Nigerian central bank has actively responded to this dismal economic situation, but failed to reverse a weakening of the Naira. This month, it sold dollars and bought the Naira after the dollar was trading above 172 Naira. It also prohibited the import of goods paid for in dollars and established a ceiling of deposits in its Standing Deposit Facility to 7.5 billion Naira to increase the amount of Naira in circulation. Despite these moves, the Naira continues to weaken relative to other currencies. The dollar again climbed up to 173 Naira on Nov. 13. In a year-to-date measure, the Naira has lost 8% against the dollar and more than 4% since Nov. 1. Many investors are at risk of a negative return on their assets in Nigeria. The Investment Corporation of Dubai, Dubai’s sovereign wealth fund, bought a minority stake in Nigerian-based Dangote Cement worth $300 million in September. Some companies are not hesitating in trying to get out of the Nigerian economy immediately. Anglo-Dutch oil giant Royal Dutch Shell PLC signed agreements to sell all of the Nigerian oil assets it attempted to sell last year. In July, U.S. company ConocoPhillips sold Nigerian oil assets to Oando PLC, a local firm.

The rise in North American energy production suggests that the global fuel supply is likely to remain high for the foreseeable future. Along with the increase in market players, this means Nigeria should not expect a return to normalcy any time soon. To replicate its recent success, it must make its economy less dependent on oil revenue. Considering the massive extent to which the economy is currently dependent on oil revenue and the expected future decrease in prices, policymakers have an unenviable task ahead of them.

-JK