gvA Update

As I said last time, I believe President Jonathan and his economic team have done well, by being able to generate an economic growth rate as high as it is, averaging around 6 percent over the past 4 years, in spite of continued insurgency and terrorism. Even so, my concern is with our politics and the coming elections and also on whether the country can easily overcome the effects of a rapid drop in crude oil prices that is upsetting the Naira. Let me state this again, In the short term, Nigeria's capacity to withstand a rapid drop in oil prices is quite limited, as Nigeria's fortunes have historically been tied to the oil industry because of the inability to significantly diversify the economy. Fortunately, we have good fiscal policy expertise. But bear in mind that even the best rain makers sometimes have trouble stopping the rains in the rainy season. On the monetary policy side, some measures have also been announced as a way of letting the Naira breathe. I would have said, let us wait and see. I don't like to wait and see, because it may be too late to react effectively by the time we finally see. What we should realize is this. What is really causing the havoc right now is psychology from pessimistic expectations and from poor understanding and perverse conclusions. The price of crude oil is dropping, but there is an acceptable bottom for budgetary and fiscal purposes. Now, the foreign reserve level is good at about $37 billion to give Nigeria 7 to 8 months of imports. That is not that bad. That shale oil that is pressing down conventional crude oil prices can become very prohibitive in production at prices below $65 a barrel. Therefore let us do this. Set the reference crude oil price at $65 a barrel and dedicate any excess revenue from a higher price to education, infrastructure development and income security, across all tiers of government. And in all this, we hope that politicians if necessary will only use political rain makers and not political witchcraft to win in the coming elections. I am Magnus Kpakol and that's my view.


Posted: Dec 2nd, 2014 @ 03:27:58 AM