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Tough Times Lay Ahead By Tony Ogunlowo

by on February 6, 2016
 
Nigeria’s financial outlook is not looking good at the moment and there are
tough times ahead.

The price of crude oil, Nigeria’s major earner, is taking a battering on
the world markets. With sanctions against Iran being lifted and the Persian
states’ ability to produce up to 500,000 barrels per day, the price of
crude oil has dropped from about $100 per barrel in 2014 to around $32 in
2016 and analysts have warned that it might drop even further.

With countries, like South Africa, turning away from Nigeria for their oil
supplies it means there will be a shortfall in the 2016 N6.08 trillion
naira budget recently presented. External borrowing cannot be ruled out and
state governors will be going to the FG for bailouts to meet their growing
financial obligations.

Cuts are imminent and the Naira will depreciate further against major
foreign currencies, already its hovering around 300 naira to a dollar. The
President and Governor of the Central Bank will have to fight tooth and
nail to stop the devaluation of the Naira altogether.

Growth will drop and inflation will rise; especially now imports are
restricted in a bid to conserve whatever foreign exchange there is
available. Foreign investment will drop considerably as foreign investors
will not invest in an economy where the currency is most likely going to be
devalued. So instead of investing they are most likely going to start
pulling their money out.

To raise cash there is a possibility oil subsidies will be removed. The
recent rapid rise in the price of kerosene is an indication of this.

There will be a lot of belt tightening and a lot of Federal and State
capital projects will either be mothballed, postponed or re-structured.

Raising taxes might generate much needed revenue and novice Finance
Minister, Mrs Kemi Adeosun, will have her work cut out for her as she
attempts to clean up the nation’s books.

For the ordinary man on the streets this will mean that the price of basic
commodities will shoot up. There will still be fuel shortages and many
civil servants will still remain unpaid  as both state and  federal
governments  struggle to balance their books. There will also be the threat
of people being laid off work as employers struggle with the rising
exorbitant cost of importing raw materials – that’s if they are not already
banned – and the scarcity of foreign exchange which will force many of them
to turn to the black market.

Even though the EFCC is doing a great job trying to recover monies pilfered
by wayward politicians it’s still not enough to make even a dent in the
deficit( - perhaps we can ask Diezani and her cronies to ‘lend’ us a few
billions from what they are alleged to have stolen!)

Selling off money wasting assets such as government private jets, getting
all politicians to agree to a pay cut and curbing their excessive
allowances will be one way to save money. If most civil servants haven’t
been paid for ages why should they?

Also, with so many wealthy Nigerians around the government might do well to
issue special high rate FGN Treasury Bonds in the hope the economy would
have picked up at the time of maturity.

Unfortunately for President Buhari it seems the rapidly dropping oil prices
his then government encountered in 1983 – 1985 has come back to haunt him
again. Only this time around cost cutting measures will have to be done
democratically and not by decree.

READ  Nigeria - In Numbers
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  • akin sodimu
    February 6, 2016 at 11:14 pm

    There is no difficulty, that Nigerians as one, cannot surmount, if Nigerians can survive the civil war, without borrowing a kobo, Nigerians will survive any form of hardship. If Nigerians can survive the SAP, introduced by Babangidas Administration. Nigerians will survive any form of hardship. The list of obstacles, that Nigerians had surmounted are endless. Above all, Nigerians should take solace in the title of the book, written by Dr. Robert Schuller, that, Tough Times Never Last But Tough People Do.

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