The status of Naira devaluation and fallen oil prices and the role of central bank Nigeria.
In Nigeria the value of their naira has fallen due to the drop in oil prices, and they are having a hard time defending their currency. The central bank in Nigeria has also raised its interest rates from 12% to 13% last year November in an attempt to stem foreign reserve loss. The bank's governor says they have spent billions of dollars trying to preserve the naira by using the dwindling foreign reserves.
The Angolan kwanza is also being affected with the falling oil prices as they hit an all- time low against the dollar. Godwin Emefiele, the bank's governor stated the consistently falling oil prices have reduced the accumulation of external reserves which inhibits the banks' ability to defend the naira and maintain its stability in an exchange rate.
According to a major telecommunication, MTN the weaker Nigerian currency will improve the African market by reducing costs. Dr. Ngozi Okonjo-Iweala, Minister for the Economy and Minister of Finance also looks at this as positive stating Nigeria is ready to absorb the shock as crude oil prices continue to fall. It is affirmed that panic would not be wise for the country. The situation is being managed, and they plan to keep the economy on a stable course. They are being proactive and have a scenario in place even if the prices go as low as 60 dollars.
She continues by stating the common man is the priority in their strategy for falling prices. The areas they plan to cut in the capital budget for 2015 have the common man's interest in mind. They will go ahead with projects; Lagos-Ibadan expressway and the second Niger Bridge that will benefit the people by creating jobs and enhancing their comfort. They also plan to focus on the common man with a projection of two to three million families across Nigeria receiving a cash transfer that will encourage school attendance, improve health and nutrition, reduce infant and maternal mortality and other issues that face the people.
With the, Sunday Independent, Ike Chioke, the managing Director of Afrinvest had an exclusive chat regarding the devaluation of the naira and the concept of the Nigerian economy impact on the common man. He agrees with the move the Central Bank of Nigeria (CBN) is making, but does call it bold. He continued to say it is the appropriate thing to do in face of the challenges coming to light with falling oil prices. The oil price has now fallen by more than half since June when the price stood at $110 per barrel. There will be a slow depletion of foreign currency as 95% of Nigeria's income is from oil. Investors look at the oil actions as a way to gauge the economy of Nigeria, once they see the prices starting to drop, they will remove their money. That leaves the CBN with two challenges; falling oil prices and investors who have money invested in the market system pulling out.
Taiwo Oguntimehin, head of the Business Development of Union Trustee Ltd. feels the devaluation of the naira is ill timed. He pointed out it should have been done during the Yuletide season as Nigerians could have gone to Diaspora and returned home with a lot of foreign currency. This, claims Oguntimehin, would have stemmed the exchange rate. He also feels the government should have put regulations in place to suppress the effects the black market is going to have.
