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Nigeria’s economy is doing like this. It’s blinking, shaking 0

This week we’re all about Naija. (BTW, the title will make sense by the end of this post.)

(1) Nigeria, like many African countries, relies on the export of a single commodity, oil, to earn foreign exchange. Lately, the gods of oil haven’t been kind to Nigeria (nor to Angola). The price of oil has fallen by about 60% over the last two years throwing the country’s budgeting process into disarray. The government has an expenditure gap of about $11billionthat needs filling. The scarcity of foreign exchange (primarily U.S. dollars) means it’s becoming increasingly costly to import foreign goods into Nigeria – including refined petroleum (like you, we too wonder why Nigeria has to re-import the oil that it exports).

(2) It’s also increasingly becoming difficult for the Central Bank of Nigeria (CBN) to continue propping up the value of the Naira, the country’s currency. The IMF wants the CBN todevalue it (i.e. let its value fall versus the U.S. dollar and thereby preserve precious foreign currency). President Buhari’s response has simply been to say “NO!” He worries that a devaluation might lead to an increase in the local price of imported goods with devastating consequences for the poor (and his approval rating). The Naira is trading at more than half its official value in the parallel market.

(3) Nigeria should have put money away when oil prices were high. But it didn’t. And former Minister of Finance Dr. Ngozi Okonjo-Iweala, whose job was to do the saving, now blamesformer president Goodluck Jonathan. Jonathan probably thought the price of oil would forever remain high.  Okonjo-Iweala should have known better than to trust the optimism of a guy named Goodluck.   

(4) Anyways, given that help from the IMF is likely to come with conditions (devaluation of the Naira, for example), President Buhari last week travelled to China to seek alternative help. He’s now back in Nigeria and his press secretary claims the visit yielded $6billion worth of investment pledges from China.

(5) The $6billion China is offering won’t require any paperwork. We didn’t make that up. That’s exactly what Nigeria’s Foreign Minister Geoffrey Onyeama told Reuters: “It is a credit that is on the table as soon as we identify the projects. It won’t need an agreement to be signed. It is just to identify the projects and we access it.” If only banks were this lenient with everybody. 

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by Grieve Chelwa

Photo credits: Getty Images

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