CNBC
Well Damn!! There are some harsh words for the Nigerian Government in a new report on the country’s fast unraveling economy by CNBC.
“Nigeria is in trouble,” Steve Hanke, a professor of applied economics at Johns Hopkins, told CNBC in an interview.
“The currency is junk and the government is incompetent and corrupt,” said Johns Hopkins’ Hanke.
Oil gives Nigeria around 95 percent of its foreign earnings.
Should crude remain at current levels, PwC expects growth to contract and oil revenues to dwindle to $20 billion.
Meanwhile, the currency has already overshot PwC’s worst-case forecast for this year, blowing past 320 to the U.S. dollar recently.
Nigeria “is caught in a macro hurricane,” famed short seller James Chanos told the annual Sohn Investment Conference last week. With currency reserves running low, the country could have “a big problem” within a few years, he said. Calling the country “a borderline failed state,” Chanos added that he was shorting South African assets such as MTN, in part because of their exposure to Nigeria.
The outlook for Africa’s largest economy remains grim.
The extremist group Boko Haram has created significant political and security challenges for the embattled government of Muhammadu Buhari, and a new militant group the Niger Delta Avengers raise risks that could hit oil production.
Amid double-digit inflation, Nigeria’s foreign reserves are dwindling as the government races to shore up a swooning currency.
Weak growth — Nigeria’s economy expanded by less than 3 percent last year — has done little to curb soaring food prices, which have risen every month since December 2015.
Meanwhile, oil prices remain firmly under $50 per barrel, heightening the risk of what consulting firm PricewaterhouseCoopers noted in a 2015 report could become a “security shock,” as weak growth feeds political instability.
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Rubbish, Rubbish, Rubbish
What exactly is rubbish?
CNBC’s article is rubbish. It marks the height of sensationalism and idiocy for Steve Hanke to describe the naira as junk. I can zero down his effontery to Nigeria’s refusal to devalue the naira. Why are foreigners pressurizing President Buhari to devalue, whereas a nation desirous of progress should think of how to add value to its currency than devalue. Again, how did he come about his conclusion that the administration is incompetent and corrupt. How could a Professor make a statement with reckless abandon? The problem of the administration is that it assumed office at a time that the International economic environment was not conducive to success; when the price of oil dwindled more than 70 per cent from over 100 dollars per barrel to 30 dollars per barrel. Before President Buhari came to power, Nigeria depended on oil for the largest chunk of revenue and this also contributed the largest chunk of foreign exchange reserve. The professor of Applied Economics should understand simple economics that this would imply shortage of FX in the CBN, which means the administration’s ability to make foreign exchange available is limited. To now think that the solution is to devalue the currency will give a false sense of FX availability, so that the FX will now be made available to purchase all sorts of customer goods like toothpicks and sardines (to mention a few) that certain people of insatiable appetite for foreign goods can buy. If this is what Hanke would prefer the government to do, no way sir. The Buhari administration has done well in managing the naira and the foreign exchange reserve. When he assumed office, the reserve stood at about 31m dollars. Now, it is about 26.9M dollars. The administration is now formulating policies to diversify the revenue base from oil to agriculture, mining and so on. This will take time.