The continuous fall in the price of crude oil in the international market and the recent devaluation of the nation’s currency, the naira, are putting serious pressure on the economy, with the currency experiencing a free fall.

The naira exchanged for between 192 and 194 to the United States dollar at the parallel or street market on Friday. Earlier in the week, it sold for N188 against the dollar at the same market.

It was similarly gathered that the pound and euro sold for between N294 and N296, and N236 to N238, respectively on the streets of Lagos on Friday.

The continued fall in crude oil price had forced the Central Bank of Nigeria to use a huge chunk of the nation’s external reserves to defend the naira.

The persistent depreciation of the naira, however, forced the CBN to on November 25 devalue the currency against the dollar by eight per cent from N155 to N168.

The central bank thus expected the naira to sell against the dollar for between N160 and N176.

However, the naira has been selling outside the CBN target band at the interbank forex market (where the banks sell to themselves and their customers), a situation that has fuelled speculation among analysts that the bank may be forced to devalue the currency soon again.

As of Friday, the naira closed against the dollar at N184.50 at the interbank market.

The continued fall in the value of the naira forced the CBN to on Thursday introduce new rules aimed at halting the slide. It barred banks from holding any amount of their funds in dollars.

It also directed the banks and members of the public who buy dollars from it to use them within 48 hours or return the unspent funds.

The implications of the fall in the value of the naira include the fact that manufacturers will have to spend more naira to buy foreign currencies with which they will import raw materials as well as purchase machineries and spare parts.

For Nigerian parents who send their children to schools abroad, paying for tuition in foreign currencies and sending upkeep money to their children will not come easy.

Analysts said the recent policy measures introduced into the forex market by the CBN had made many Nigerians, including importers who need dollars and other foreign currencies, to take to the parallel market.

According to them, parents who want to pay their children’s tuition overseas and importers will have to get their forex in the street rather than wait endlessly at the interbank market.

In a circular on November 6, the central bank said it would no longer sell dollars to importers of electronics, finished products, information technology equipment, generators, telecommunications equipment and invisible transactions at its Retail Dutch Auction System forex market.

School fees fall in the category of invisible transactions.

Consequently, parents who used to buy say $10,000 to pay their children’s tuition overseas for N1.68m, will now need to part with N1.94m, an increase of 15.4 per cent.

The Acting National President, Association of Bureau De Change Operators of Nigeria, Alhaji Aminu Gwadabe, predicted on Friday that in the next one week, the dollar would likely sell for N200 to a dollar at the parallel market.

Aminu and other analysts, who spoke with our correspondents, linked the development to the continued fall in the prices of crude oil in the international market and recent developments in the nation’s financial regulatory environment.

The national currency has fallen by over 10 per cent against the dollar at the interbank forex market since the crude oil prices started tumbling in June.

Brent crude oil, which sold for over $110 per barrel in June, had fallen by over 40 per cent so far. As of Friday, it sold for $60 per barrel. The development has reduced the nation’s capacity to earn more foreign exchange to defend the naira.

Nigeria, which is Africa’s largest oil producer, receives 70 per cent of government revenue and 90 per cent of all foreign exchange earnings from oil.

Analysts have, however, criticised the directive, saying it would be counterproductive. They said the naira would keep falling because the CBN did not have adequate forex to defend the naira as a result of the falling crude oil prices.

With the recent tightening of the conditions that allow access to dollar by the CBN, experts expressed concern that it would increase the pressure on the cost of locally manufactured and imported goods, among others, as naira looks set to depreciate further.

A financial analyst at Ecobank, Mr. Olukunle Ezun, said the real impact of the CBN’s Thursday circular would be far-reaching.

He said, “Looking at the fact that the Nigerian economy is mostly import dependent, if the naira is allowed to depreciate significantly, the impact is going to be on the goods being imported.

“I think the impact is quite huge on all imported goods, and if care is not taken, it can actually impact the inflation outlook. By and large, the cost of goods will go up and it can impact on the employment rate. We may start seeing downsizing or downgrading. The impact is going to be huge and that is why I believe the CBN will not allow the naira to weaken further.”

Prof. Sheriffadeen Tella of the Department of Economics, Olabisi Onabanjo University, Ago-Iwoye, Ogun State, said there had been shortage of foreign exchange as a result of falling oil revenue amid the decline in prices, which were affecting the naira.

Tella said, “What the CBN should be doing is to find a way of reducing the pressure on the naira by making sure that importation is highly reduced. But the policy of the CBN alone can’t do the magic, it has to be with the support of the fiscal sector. The Ministry of Finance should make a policy to reduce importation and ensure that whatever is exported, the money should be repatriated on time.

“More importantly, the central bank should ensure that money being made by government agencies is domiciled within the CBN. A situation where other agencies like the NNPC are also acting as bankers to the Federal Government is not tidy. At this point, there must be serious control of the inflow and outflow of foreign currencies by the CBN.”

He said the depreciation of the naira had already increased the cost of production in the manufacturing sector as most of the raw materials being used were imported.

Tella said the increase in the cost of production would affect the prices of goods, adding that “cost of production will continue to increase if the naira deteriorates further. Even the producers will have to cut their level of production, which of course implies that we are going to be in a serious problem in terms of employment generation.”

The Director-General, Lagos Chamber of Commerce and Industry, Mr. Muda Yusuf, said any offshore obligations, including payment of school fees of students outside the country, servicing foreign debts and going for vacation would be difficult at this period.

“The depreciation of the currency is already putting upward pressure on the cost of production and services because quite a lot of activities that take place here are dependent on imports. It will lead to a reduction in companies’ profit margins and some companies may be forced to downsize. We are also likely going to see inflation,” he said.

A report by Ecobank Research on Thursday stated, “Tightening the conditions that allow access to dollar while making no changes to how foreign exchange is supplied will further heighten the naira volatility with further depreciation most likely; as such, we expected the naira to trade between 190 and 195 to the dollar month-end December 2014.

“While the CBN’s reason for the circular is to maintain the stability of the naira, it is not clear how it intends to achieve this objective, given following recent sharp fall in Brent oil prices and uncertainty over the normalisation of the US monetary policy following the end of QE III in October.

“Overall, the circular will create more volatility that will require another set of CBN circulars to address the dollar supply and demand bottlenecks. As such, the CBN might need to continue to intervene in the interbank FX market.”

http://www.punchng.com/news/job-losses-loom-as-naira-sells-194-to-dollar/

We survived economy meltdown, so we will survive this again. God bless Nigeria!!!

a weaker naira means that it will be cheaper to produce goods in nigeria and sell to the world!
this should be an employment opportunity for hardworking people and entrepreneurs.

tit:
a weaker naira means that it will be cheaper to produce goods in nigeria and sell to the world!
this should be an employment opportunity for hardworking people and entrepreneurs.

Good one. are you an economist?

tit:
a weaker naira means that it will be cheaper to produce goods in nigeria and sell to the world!
this should be an employment opportunity for hardworking people and entrepreneurs.

titconomics?

fyneguy:


titconomics?

will you teach me?

The story will surely end somehow with good lots to Nigerians.


But as of now, eee no easy

temitemi1:
We survived economy meltdown, so we will survive this again. God bless Nigeria!!!

Keep surviving

Until we diversify our local and export economy, naira will be subjected to issues like this.


The fastest economic routes to achieve diversification are


Resource control

Fiscal federalism

Privatization



All this overdependence on oil when we can encourage States LGAs Corporations and individuals to exploit and add value to our resources shows we are not ready

If you are reading this, you shall nott experience job losses tnext year.

For me, this is the opportunity for us to allow the naira assume it's actual value in the market. The CBN, Finance Ministry and the National Planning office know exactly what is going on. I dont think naira is being devalued, its value has always been falsely maintained by squandering our foreign reserve. It is time to take off the protectionist glove and let the naira gain value on the merits of improved production, employment generation and real economic activity not on the back of foreign reserve, afterall Nigerians are not happy with debt. We can't eat our cake and have it.

It takes ball to do what is happening now in an election period. Dollars will be injected early next year to firm it a little but we should fold our sleeves to build on a solid foundations of agriculture, manufacturing and services that earn foreign exchange.

This government sef

Rubbish!

If this isn't coming from NOI polls then everyone should disregard it. It is a concocted lie from the propaganda mills of APC!!

Yet, the national institute of statistics came out few days ago with very impresive results of fallen inflation. I have no idea where they get their data. And I remember quoting Naira at N178 to $1 on a thread and one novice was all over the place making noise.
Unless we're manufacturing what the world need, forget about economic development. The Nigeria economy have not been growing for a very long time, it's just stagnant. Lack of electicity is not helping this economy at all.

i luv this

most of what I read isn't encouraging....xcept 4 dat part where d op mentioned dat dere wud b increase 4 payment of school n tuition fees 4 dox whose children are schooling abroad.....sum lecturers go hearam.

God have mercy on this nation







We really need change in this country!!!!!!!!!!!!

Oil overdependency caused this.

And yet....Nigerians love their oil.

Love it soo much that they fight tribal wars over it.

Now, our economy is in a free fall....but what do we see

Northerners and Southerners fighting over who owns the oil....instead of developing industries.

Time we left oil....and became industrialized.

Oil is a CURSE!

By the time Obasanjo handed over power to Shagari's civilian administration in October 1979, Nigeria's Dutch disease had reached a malignant stage. Buoyed by the significant increase in oil prices in 1979-82 (from $17.73 in 1979 to $28.64 in 1980, $32.51 in 1981 and $32.38 in 1982), the first three years of the Shagari's administration [b]was characterized by profligate consumption, excessive importation and pervasive corruption. Like the two preceding regimes, the Shagari administration failed to take adequate steps to arrest the burgeoning Dutch disease. In fact, the naira further appreciated from N0.5957/US$ in 1979 to N0.5464/US$ in 1980 before it started depreciating gradually (under mounting economic difficulties) to N0.7241/US$ in 1983 but with an inflation rate of 23.2% as against an inflation rate of less than 5% for Nigeria's major trading partners. With the imposition of OPEC quota, Nigeria's oil production declined from about 2mb/d in 1980 to 1.4mb/d in 1981, 1.3mb/d in 1982 and 1.2mb/d in 1983. Despite these restrictions, the price of crude oil declined from $32.38/b in 1982 to $29.04/b in 1983, thus leading to a significant decline in government revenue and export earnings. The pervasive corruption, poverty, decay of economic and social services and poor economic situation led to the overthrow of the Shagari government by the Buhari/Idiagbon military regime(1984/85). The Buhari/Idiagbon regime came as a reformist autocracy but they failed to address the Dutch disease syndrome. Their immediate focus was to wage a "war" against indiscipline and corruption. However, the price crude oil further declined from $29.04 in 1983 to $28.20 in 1984 and $27.01 in 1985 and this worsened the economic situation. [/b]

From: Managing the Dutch Disease in Nigeria.

nawaoo

Which way Nigeria?













Jus my signature

exporters be smiling to the Bank
Agriculture all the way

Indeed we need CHANGE come 2015.

If allow to continue am so sure before he end his teunre in 2019 by then $1 will equal =N=500-800.
So sad

#‎ Nigeria‬ is really
getting interesting..
Fellow compatriots, we
need not shout
nor fight ourselves.
President Goodluck Johnathan is a good man as a person,his simplicity and
gentlemanness is
second to none.
*He has given us his very BEST over the last 6 years. I mean,what else are we asking for?
*He has granted
Alameisiya 'STATE
PARDON' and my guy is now running for Senate.
*He allowed Fayoose to distrupt a court
session and beat up a judge, while he walks freely. I wonder if Nigeria is sane.
*He locked up the
house of rep from the entrance of
the CONSTITUTIONAL
speaker of that
house.
*7 law makers
impeached a speaker in Ekiti in a house of about
26 men, and
nothing happened.
*16 was suddenly
greater than 19 in
base 10, just to cancel the one-term agreement he signed with the NIGERIA Governors' Forum and all Nigerians in
2011.
*Subsidy has been removed and the standards in our hospitals have reduced with time.
*$20 billion is missing and minister of
Petroleum eats and dines with the
prexy.
*Another BIGGER
& BOLDER subsidy is scheduled for
1st of June,2015 and you may have
to sell your laptop charger before
you can buy fuel
to charge that same laptop!!!
* Earlier this year, over 22 innocent
Nigerians were killed and injured in the job scam
organized by the
Nigerian Immigration
Service(NIS) . The
Minister of Interior, Abba Moro,told us the job interview was "simply mismanaged" and he has retained his office and even with extra luggage.
*1 Naira used to be equal $1 to 1.4 under ‪#‎ GMB‬ but now it's #194 to just $1, the worst ever in our history.
* Madam Gele, Ngozi Okonjo, just told us we need an extra $5billion, through debts of course, so that our economy will not collapse like
Humpty-Dumpty.
*While Benue State University was on an unending internal
strike killing the
future of poor
Nigerians, Senator
DAVID MARK (son of the soil) built his own PRIVATE
UNIVERSITY, of course with tax payers' money, and my gentle
nice president followed him to launch the
school shamelessly.
*He has spent all
money in the treasury and even had to BORROW an extra $1billion but # BokoHaram
keeps getting
more equipped than our military.
*Over 200 girls are missing, over
15,000 killed by
‪#‎ BokoHaram‬, over 6 million displaced from
their homes and
uncountable injured beyond repairs yet my president went to a meeting in
‪#‎ KENYA‬with 7
different PRIVATE
JETS..
*clears throat...
* # PHCN is giving their loyal customers
GENERATORS as xmas gifts for paying their
‪#‎ electricity‬bills on time.....
Goodluck Jonathan
Jesus °ƒ Otuoke ‪#‎ TransformingNigeria‬

And it keeps increasing daily

I can see changes coming.

And jolantern's regime is d beSt to sum mumuz.

hmmmmmm nawa for this government

If continuity does not favour us then CHANGE is inevitable