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CBN and the depreciating naira

It is no more news that Nigeria’s currency, the naira has continued to tumble against the dollar at an alarming rate.   Presently, the currency exchanges for N276/N300 for one Dollar. As result, the Central Bank of Nigeria (CBN) has continued to ration the Dollar in its weekly foreign exchange sale. Expectedly, everyone is blaming the plunging oil revenues for the current woes, especially in light of the fact that the product accounts for more than 90 percent of Nigeria’s foreign currency earnings. Before now, the Ministry of Finance announced that the country’s external reserves would not sustain more than three months of importation.
Certainly, Naira’s depreciation is having a domino effect on the capital market performance. Fact is that the naira exchange rate depreciation is pushing up domestic inflation through higher import prices, even as investors would want higher returns to compensate for the inflation, thereby prompting the CBN to raise interest rates to fight off inflation which in return pushes interest rates even further. Although the CBN has implemented several measures to slow the depreciation, it appears that none has worked thus far, as there appears to be panic in the forex market due to either real concerns or fears spread by speculators.
Like every other Nigerian, we are worried at this development and the negative effects on the economy. Analysts are of the view that the current state of the Naira would only worsen the situation for the citizens, given that most consumer goods are imported, even as it clear that the bulk of raw materials for industries are also imported. It should be noted that Nigeria is not the only country facing falling crude oil sales. However, she has been slow at exploring alternative sources of revenue.
On several occasions, we have had cause to remind the authorities that the country has other mineral resources such as coal, bitumen, iron ore, gypsum, kaolin, phosphate, limestone, marble, barite, gold, bentonite, gemstones and others. Unfortunately, these are yet to be exploited for foreign exchange earnings which in turn would cushion the effect of dwindling revenue from oil. There are continuing fears that the depreciating Naira is curtailing foreign investments, even as it is true  that  any investor would have a rethink before coming to the country, since it appears there is little likelihood that any investment will produce good return.
Even though the Central Bank Governor, Godwin Emefiele has been trying to ameliorate the free fall of Naira, more still has to be done, as the continued depreciation is having a far reaching negative impact than the havoc caused by the last collapse of the capital markets.
While the Buhari administration is experimenting with creative ways to stave off a total economic collapse, there is still widespread fear that Nigeria is already experiencing stagflation. The economy is not only stalling, the fact is that prices for goods are skyrocketing because importers are passing the increase to the consumers.
It is therefore imperative that the Federal Government take immediate measures to diversify the country’s economy and wean it of overdependence on crude oil sales. We insist that for Nigeria  to ride out of the present economic storm, the government must put in place a new regime of taxation, agriculture, manufacturing, international tourism and solid mineral prospecting  for the long term benefit s of the present and future generations.

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