The Central Bank of Nigeria is put under pressure to devalue the Naira further due to the Brent futures crashing to $31 per barrel after the Organization of Petroleum Exporting Countries, OPEC, disagreed on crude pricing because of the effect of COVID 19 on global economy.
Already the foreign exchange reserve has been put under stress even before the advent of the disease due to unprecedented borrowing embarked by the Nigerian Government. The reserve graph has sloped by 20% since November 2017, and may soon hit the $30 billion threshold. Governor Godwin Emefiele The Central Bank Governor, is expected to start adjustment of currency policy as soon as that threshold is breached, or even before then.
Part of the fears are in electronics and telecom gadgets. Of particular concern is the decreasing import ratio that has resulted in expected inflation, particularly in phones and computer and their accessories. Since the inception of the Buhari administration, export has declined.
The official rate is currently 366 Naira to a dollar, the weakest in three years, though there are other unofficial rates that allow for round tripping of the dollar.
Federal government has targeted 2.4 trillion Naira in oil revenue to fund the 11 trillion Naira budget, to be supplemented by borrowing and tax returns. The budget benchmark was put at $57 per barrel-a situation that has forced an emergency meeting of financial stakeholders. Buhari does not have a functional economic team, though he last year assembled eminent Financial gurus, including a former CBN governor, into a team that he hardly makes use of nor refer to. Instead he travels to International economic meets with loyal politicians.
Latest borrowing attempts have revealed that 40% of the yet to be borrowed money is to be deducted from source to pay consultants, while the whole country pays for the loan. It is estimated that within the next five years, seventy percent of Government revenue will be used for debt servicing only.
