Kayode Oyero

A former United States Ambassador to Nigeria, John Campbell, says Nigeria is experiencing a shortage of Foreign Exchange due to the fall in international oil prices.

He said the dip in oil prices occasioned by the coronavirus pandemic has had a negative effect on the Federal Government’s revenue and its access to US dollars through oil exports.

This was contained in a piece by Campbell published on the website of the Council on Foreign Relations, a US nonprofit thinktank.

The PUNCH reports that oil closed at about $60 per barrel in December 2019 but has since plunged to about $25 per barrel in May 2020.

The former American envoy to Nigeria said, “Driven in part by the need for dollars, the government devalued the Nigerian currency, the naira, to 360 to the U.S. dollar, down from 306. That, apparently, was not enough. As of May 12, the naira is traded at 445 to the dollar on the street, and the one-year forward trading rate is 514 to the dollar, which means traders expect the exchange rate to fall even further.

“The Lagos stock exchange index is down about 12 percent since the start of the year. Because it is denominated in naira, and the naira has been devalued, the loss in value is even greater in terms of international currency. There are anecdotes (impossible to quantify) that rich Nigerians are getting out of the market and doing what they can to shelter their assets abroad—an old song in times of instability, whether economic or political.”

donbachi:
Nigeria will make do with the recovered abacha's loots....

Racoon:
Of course this is happening because crude oil is our only source of foreign exchange with our mainly oil dependent mono-economy.

helinues:
We must blame Buhari for the low oil price...

Racoon:
Perhaps you have forgotten the dullard promised to stabilise oil prices? Helinus!!!!

helinues:


That was a twisted media talk.. That's not logically possible.

4Play:


We came into this crisis with the excess crude account (ECA) at $70m from $2bn just 2 years ago, forex reserves falling to $38bn in January this year from $45bn in June last year, and a tripling of foreign-currency denominated debt from $9.5bn in 2015 to circa $27bn today. These have left us more vulnerable than we should have been as we ran down our 'savings' (ECA & forex reserves) at the same time we were tripling our outgoings (debt repayments).


Because Nigeria is dependent on oil exports for forex, any government, no matter how competent, will struggle. But Buhari's government increases the likelihood of financial distress due to its economic illiteracy.

It should have taken the opportunity of the 2015/16 forex shortage to float the exchange rate and abolish the implicit subsidy in maintaining multiple exchange rates, and abolish fuel and electricity subsidies. These would have preserved cash and ensure the scarce money available to the government is used in beefing up infrastructure, healthcare and education.

I understand the urge to borrow from abroad as it tends to carry lower interest but we shouldn't do this unless we have built up enough fiscal buffers in the form of savings and lower budget deficits.

Any person who follows the history of oil prices will realise that it is a volatile commodity prone to sudden crashes. Government spending and borrowing should always be managed with this in mind until we wean ourselves from dependence on oil.

KnowAll:
Nigeria cannot run out of forex because the diaspora community sends in about $20 billion dollars every year. Where do u think that dollar ends, Nigeria central Bank.