Naira Fall Against The Dollar

The Naira has been on free fall against the dollar for some time now, falling as far as a dollar to N350 of the parallel market. The question most people are asking is why the dollar is falling at such a pace now, who is to blame? Is it the present government? While the present government should assume responsibility and find a way to fix the economy, it should be noted that it is not a situation created by the present government, rather a situation they find themselves due to global market demand and Nigeria lack of investment in other sectors of the economy overtime. Nigeria major export is known to be crude oil which makes almost 75% of the country income. Over the years the oil market has been booming and Nigeria oil has been of great demand thus the country has lots of foreign reserves and can cater for the demand of foreign currency by Nigerians. It should be also noted that Nigeria is a major importing country. We import lots of good from luxury items such as wine, clothing’s, beverages, to food such as rice, tomato paste, canned drinks and so much more. Nigerians are also funds of sending their family abroad for various reasons from education, holidays, shopping etc. And through all these we spend foreign currency to cater for these needs or luxuries, depending on how one look at them. Now during the oil boom the effect of these luxurious spending drift was not felt because there were more dollars coming in for the sales of crude. The excess profits made from goods were enough to balance the outflow of foreign currency. The cost of producing a barrel of oil is below $30 and during the oil boom; a barrel was sold at more than $100. So you can imagine the excess profit being made. It would have been prudent to invest in other sector of the economy and make them grow with the excess profit being made then and to watch and find way to plugged the excess foreign exchange leaving the country for that would have set the country in the right direction and prepare us for tougher time rather to looking for emergency solution now. Fast forward to present, and Nigerians still have the culture of spending foreign currency, importing goods, and spending so much abroad and the shortage in foreign currency due to fall in oil prices and lack of buyers for Nigerian crude, there is not much foreign currency coming into the system as it is going out, thus the simple economic explanation of the situation, supply and demand. The demand for foreign currency is high and the supply is low. The CBN tried pegging the naira to the dollar at just below N200 but it keeps rising on the parallel market as the dollar is scarce. The governments have implemented some measures to curtail the spending of foreign currency by placing ban on the importation of some goods and restricting some bank transactions abroad. But the situation seems not to be subsiding. Now sensing the situation at hand, one expect further rise of the dollar to the naira as it seems crude prices are not going to rise anytime soon, at least not to the extent we had seen it before as speculated by experts in the field as can be assume by recent OPEC meetings. In view to this the government need to set up a highly technical and active economic team to try and savage the economy as we have gone beyond the blame game and we need to be proactive and face the present situation we find ourselves. No doubt they will be sacrifices to be made and it has to start with the present administration as they try to build the economy away from oil

THE BUDGET AND THE ECONOMY

The controversy surrounding the budget and the massive corruption discovered in it is something of a major concern, especially now with the present economic situation experiencing in the country following the fall in oil prices. Many have called for total withdrawal of the budget and for every ministry to go back and work on its departmental budget before compiling the whole budget, as many ministers have come to disown the whole or part of the budget concerning their ministries.

Recent cases have shown many minister are not aware of what is contained in the budget of their ministry, as was that of the minister of health, who in a Senate hearing disown the budget as it contains a lot of discrepancies and also the Minister Of information and culture, Lai Mahammed has also deny knowledge of almost N300 million budgeted for acquiring computers, as he said he does not know where that is coming from and believe the amount is too much for such a project.

The problem with the budget is that millions if not billions of Naira are going to be spent on over blotted project and in some cases nonexistent project as some corrupt party has manipulated them into the budget in a period where the country is experiencing a serious economic downturn, one it has not experience in decades and thus the country is looking to borrow to be able to finance the budget. And also the government had implanted some taxation measures on citizens to raise enough money to finance the budget.

Now the fear of most citizens is that the sacrifice Nigerians are being made to pay through taxation and the interest to be paid for borrowing to finance the budget is just going to go down the drain in corrupt practices by some few through the civil services it is the usual practice.

The government through the finance minister came out of recent to announce that they can reduce the budget deficit from money saved through the implementation of the Treasury Single Account TSA and how it has saved millions of Naira.

Now from the budget figures and the error noted so far, a proper look and professional analyses of the budget will save the country some millions of naira as the TSA did and further reduce the budget deficit and reduce the amount to be borrowed both internally and externally and in so doing saving the economy for further depreciating.

The best thing is to withdraw the budget and carry out a proper forensic audit and block loopholes prosecuting those involved in manipulating budget figures and come out with a revised budget. This will reduce cost, safe the economy and help in reducing corrupt practices in the civil service.