With the raising of the Monetary Policy Rate (MPR) to 13 per cent from 12 per cent and the official exchange rate to N168 from N155 to $1 and 8.38 per cent adjustment in the value of the naira, on November 24, the Central Bank of Nigeria (CBN) has seemingly taken a measure to salvage the nation’s currency from final fall. The devaluation of the naira is simply a desperate action. The apex bank has nevertheless disclaimed the appellation, stating it did not devalue the naira. However, the action of the CBN will no doubt have adverse effect on the steadily rising unemployment rate and increasing poverty in the country.
Presently, some states are unable to meet basic obligations of due payment of salaries and allowances. Of course, nothing illustrates the development better than the fast changing fortune of the naira. The nation’s currency is comparatively weak which has been made worse by the low price of crude oil in the international market. Finance Minister and Coordinating Minister of the Economy, Dr Ngozi Okonjo-Iweala, has also indicated that all is not well with the nation’s economy. She said, “Government is doing everything within its power to ensure economic stability in the country. Presently, government had been budgeting below the existing oil price to help build buffers in case of uncertainty.
“We are operating an economy that depends on a product that fluctuates with oil price and we don’t have the right to control the price. Just like you have in your own household, when the quantity diminishes or the price drops. You remember in 2007 to 2008, the price of oil dropped from $140 to $38.” Consequently, she announced that the citizens should expect some austerity measures next year, including removal of subsidy on petroleum products. All these are fallout from the steadily declining global oil price.
The 2015 budget oil benchmark was recently adjusted to $73 per barrel from $78 per barrel initially proposed by the government. The nation’s currency reached a record low of N178.85 against the dollar a day after the apex bank devalued the currency. The level was below the CBN’s new target band of five per cent plus or minus N168 to the dollar after the devaluation. Justifying the decision, CBN Governor, Godwin Emefiele, told investors that Nigeria’s foreign reserves stood at $36.5 billion representing 18.3 per cent reduction from a year ago despite efforts to strengthen the naira.
For a country where corruption is endemic depletion of the foreign reserve is not surprising. So is the futile effort to arrest the trend. At any rate former President Olusegun Obasajo’s observation lately aptly illustrates it: “For quite some time, the covered and hushed up corruption has had its toll on the economy. The non-investment in the oil and gas sector by major international oil companies has added its own deleterious impact. Our continued heavy dependence on one commodity has not adequately prepared us against any shock in that one commodity in the international plane.” Unless the situation is well handled it would get to a point the federal government would not be able to fund its budget. We may have to borrow to pay salaries.
The price of oil debacle is taking its toll on the amount paid into government coffers and shared by the federating 36 states and FCT on a monthly basis through the Federal Revenue Accounts Allocation Committee (FRAAC). The states are already facing financial crisis. We, therefore, urge that urgent steps be taken to arrest the irretrievable collapse of the nation’s economy. We also advise that the proposed austerity measures should have a human face in order not to over-flog the already battered citizenry.
