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Nigeria’s economy, a volcano waiting to erupt, says CBN

By Chijioke Nelson, Calabar
29 July 2015   |   11:07 pm
THE Central Bank of Nigeria (CBN) has described the nation’s economy as “a volcano waiting to erupt” had the foreign exchange pressure been left unchecked.

THE Central Bank of Nigeria (CBN) has described the nation’s economy as “a volcano waiting to erupt” had the foreign exchange pressure been left unchecked.

Its Director of Monetary Policy Department, Moses Tule, disclosed this yesterday in Calabar, Cross River State, during the opening session of the two-day seminar for finance correspondents and business editors.

Tule, in a lecture titled, “Crude Oil Volatility: Implications for External Reserves and Exchange Rate Management in Nigeria,” said the recent policy on foreign exchange was an edge against the imminent disaster to the country’s economy.

“A rapid fall in oil prices threatens Nigeria’s macro-economic stability because foreign exchange earnings, government revenue and domestic money supply are largely dependent on the receipts from crude oil exports,” he said.

He lamented that the economy is dwindling, even when Nigerians are overly concerned with the monetary policy, which tweak the interest and exchange rates while ignoring the fiscal policy.

According to him, the economy cannot grow without balancing both sides, as the tax system can be used to raise the required fund to balance the budget, which the government has ignored, focusing on oil.
Tule regretted that over the years, Nigerians were less concerned about what happened to the implementation of budget items, which are major source of distortion to the economy. He advised the nation to adopt the Ethiopia model of industrialisation and diversify the economy.
Meanwhile, an economist and Chief Executive Officer of Financial Derivatives Company (FDC), Bismark Rewane, has restated his call for fuel subsidy removal as panacea for the desired economic growth. He contented that with subsidy constituting 15 per cent of the nation’s import bills, the current policy modification by economy planners may not yield the desired result. 
This apparently followed President Muhammadu Buhari’s resolve to sustain oil subsidy, stating that the argument for its removal were not convincing and deep enough. 
Speaking on the “Evolution of the foreign exchange market in Nigeria and the way forward,” Bismark warned that “if fuel subsidy is not dealt with, policy modification will not yield desired results. Remove subsidy and aberrational demand pressure disappears.”
Nigeria being an oil-dependent economy, he said, the behaviour of exchange mirrors the movement of oil prices at the international market, and the nation faces a dual problem of resource and management.