By Lanre Fashina
The Forex Factor
During the first quarter of 2016, heightened scarcity of Forex and formidable exchange rates had negative multiplier effects on the economy including the manufacturing sector where imports of production materials are been dependent on availability of Forex which have become herculean to come by, even at exorbitant rates. Refined crude oil products such as diesel and Premium Motor Spirit (petrol) imported into the country by marketers virtually went out of circulation leading to power deficits and prolonged queues at fuel dispensing station during the first quarter. The attendant loss of productive man-hours in the period was contributive to the observed negative economic index in Nigeria for the first quarter (Q1) of 2016.
However, while conceding that the difficulty in sourcing Forex for transactions might have handicapped some Nigerian businesses from importing requisite commercial items from the international market, the Nigerian government’s regulatory restrictions on Forex policies was aimed at stimulating local productivity and resurgence by looking innovatively inwards.
A Ray of Hope?
Somehow, in recent weeks, the gloomy lull in the global oil market appears to be panning out gradually as seen by gradual upward surges in global oil price. Oil prices rallied in May and June to about 50 USD per barrel for the first time in 2016. This development is in contrast to the previously sustained downward spirals including a price of 27 USD per barrel earlier in January of 2016. The upsurge in global crude oil prices is due to supply disruptions in some parts of the world including Nigeria. According to a Reuters news insight in May quoted below:
‘’A series of outages around the world, such as wildfires in Canada and a spate of violence in Nigeria’s oil-producing region, has helped cut global oil supply by nearly 4 million barrels per day this month”.
Irony of Militancy
Interestingly, in the Nigerian case, resumed militancy activities in the oil-rich Niger-Delta regions sabotage oil platform installations and decreases usual volume of crude oil production from the country, thus creating a ‘scarcity’ that drives up the costs of the commodity in the international market. However, the consequent decrease in daily output translates to a loss of revenue for the Nigerian government while other peaceful oil-producing countries benefit from the jerked-up prices of black gold with sustained quota. The accompanying sabotage of natural gas supply by the same militants also compromises power generation capacity of the nation with ramifications for the industrial sectors. This is the irony.
It goes without saying that the present times call for strong financial prudence, probity and strong leadership to steer Nigeria’s economy to safe habours. Although it still needs to demonstrate clear articulation of long term economic turnaround policies, the obvious commitment of the current leadership to stemming the tides of corruption; plugging financial loopholes (such as through TSA initiative); combatting sabotage occasioned by security challenges in the North-East and Niger-Delta; and also creating economic intervention measures send positive signals of economic revivals across.
Towards an intervention initiative themed Governments Enterprise and Empowerment Programme (GEEP), the federal government of Nigeria has set aside a sum of 500 Billion Naira as special investment fund in its 2016 budget. An business loan reservoir has been created out of this to be distributed at very-low interest to specific target groups including market women, artisans, traders, small-scale farmers and enterprising youths for empowerment. Providing business credit to empower this demographic is expected to accelerate economic opportunities for beneficiaries. The scheme will be implemented through the Bank of Industry (BoI).
This initiative is meant address the challenges of unemployment, alleviate poverty and spur myriads of economic activities with positive multiplier effects through providing business funding access to drive Small and Medium Enterprise (SME). Vibrant SMEs are bedrock of a country’s economy, product diversification and gradual scale-ups with attendant multiplier effects when well implemented and sustained. The coming days are strategic but we have reasons to hope for Nigeria’s economy.
DISCLAIMER: Views expressed in this article are exclusively the author’s, and do not necessarily reflect the editorial policy of Zenera Consulting.