What Is The Fate Of The Nigerian Naira? Amidst Global Uncertainties

 
What Is The Fate Of The Nigerian Naira? Amidst Global Uncertainties
 
With the application of logical reasoning, we must understand some basic trade movements and the instant implications of same on all Africa nations big or small.

First of all, Nigeria is a small country on a global GDP scale as the top 10 world economies i.e United States of America, China, Japan, Germany, United Kingdom, France, India, Italy, Brazil and Canada holding over 67% of the entire world’s Gross Domestic Products (GDP) and with the US Dollar remaining the world's reserve currency, Nigeria is only a tiny part of the remaining 32.2% slice distributed amongst about 185 countries. Note that the global wealth situation is grossly skewed and a lot can happen if those 10 guys decide to go rogue.

However, this does not necessarily mean that Nigeria is doing badly as it remains number 1 in Africa with a GDP size of about $420Billion but its currency is heavily influenced by the strings that are pulled in the foreign scene especially those that affect oil prices as about 90% of Nigeria’s foreign revenue come from crude oil sales and that automatically means that both the look and feel of it’s foreign reserve is mostly dependent on the movement of global oil prices. Take note that, the Nigeria foreign reserve currently sits at around $33Billion and positioned to settles most of the country's offshore transactions and so, situations such as this crude oil price dive will do a lot more harm than good to the Naira due to inevitable pressure driven by normal economic activities.

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The Saudi vs Russia price war (even though it is now being settled) coupled with the current Covid19 pandemic could not have happen at a worst time for Nigeria as this continue to drag oil price from excess of $70pb to downwards its production cost of $22pb. There already existed indications of economic downturns for Nigeria which had led many analysts from around the world to bet against the Naira and then COVID19 just aggravated the situation by stopping almost all business activities including core oil consuming ones.

The world right now is seeing new levels of negative economic figures with the most alarming WTI crude trading at $-37 (minus $37) never recorded in world history.

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Propositions to savage the Nigerian economy as well as the Naira:
  1. Cut down crude production costs and all other associated costs as well as transactions costs to cushion the fall
  2. Massive cut down of importation of budgetary capital expenditure items and strive for many to be sourced within the shores of Nigeria
  3. Urgent cut down cost of governance: Nigeria currently has about 43 Ministers including Ministers of states, THIS IS ABSOLUTELY UNNECESSARY! We really do not need more than 6 Ministers for the 6 geopolitical zones of this nation. Also, if FCT Abuja has only one Senatorial District why should states like Ekiti, Osun, Gombe, Katsina, Abia, Ebonyi and other bankrupt states have 3 senatorial districts?? We can go on and on listing areas of our unnecessary spendings but summarily, Nigeria must live beyond its means.
  4. Heavy restriction of all dollar denominated investments in Nigeria and more restrictions on the transferability of government securities to control capital erosion
  5. A temporal ban on foreign currency loans by Banks: Nigerian Banks with a total asset size of about N45Trillion i.e $106Billion looks good but it is just about 50% of Google's which is just one company in the US. Foreign loans only creates unnecessary pressure and even restrains hedging business activities which forms a good part of the capital market
  6. Increase lending rate: high lending rate is a key driver for capital retention within the economy due to its ability to discourage proceeds repatriation as well capital flight. A low interest would see investor trooping towards another economy with higher interest rates.
  7. Inclusion of Central Bank Licensed Bureau De Change Operators in the money transfer ecosystem through granting them agency status to the likes of money-gram, western union, RIA etc This will help improve and encourage fund remittance "into" Nigeria as the World Bank already projected 
  8. Deepen trade trade with fellow African nations. This would reduce pressure on the Naira
  9. Extend the current frontiers of education to standardized vocational institutions. Like no time in history, Nigeria needs artisans and then restrict influx of artisans into Nigeria from neighboring African countries so that our own can hold onto jobs
  10. Improve communication and citizens engagements

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