Having already raised rates and devalued the Naira (and widened its trading bands) [5], the Nigerian currency continues to collapse to new record lows as crude crashes lower and lower. Having tumbled 11.5% since oil prices peaked, the Naira is holdinga round 184/USD - over 9% above the new peg and dramatically outside of the new trading bands of +/-5% as it seems capital flight is out of control. That is probably why, as Bloomberg reports [6], Finance Minister Ngozi Okonjo-Iweala has commented that Nigeria won’t resort to printing money or imprudent borrowing as it adjusts to lower prices of oil. “This is not the first time this country has gone through lower oil prices and it will not be the last,” she said - making it very clear that Nigeria is not Zimbabwe (yet).
[7]
Nigeria won’t resort to printing money or imprudent borrowing as it adjusts to lower prices of oil, the mainstay of its economy, Finance Minister Ngozi Okonjo-Iweala said.
“This is not the first time this country has gone through lower oil prices and it will not be the last,” she said at a conference in the capital, Abuja. “We should avoid the kind of fear that will paralyze us or make us do the wrong things out of fear and alarm.”
Nigeria, which is facing general elections in February, lowered its proposed budgeted oil price last week to $65 per barrel, the second cut in less than a month, signaling government revenue is set to plunge in Africa’s biggest crude producer.
Any borrowing will be done “judiciously,” Okonjo-Iweala said. Increased tax revenue and an expanding private sector would help the West African country offset the impact of falling oil prices, she said.
Global oil prices have plunged more than a third since June, prompting monetary policy makers to devalue the naira for the first time in three years, and threatening to erode public finances in a country that relies on crude sales for 70 percent of government income.
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So they better hope oil comes back soon...
[8]
