Currency Devaluation And Fuel Subsidy Removal

In every country of the world, exchange rate level is the paramount target of economic policy targeting. In other words, exchange rate policy should be geared towards the attainment of long-term equilibrium rate, so as to achieve certain macro-economic objectives e.g. balance of payments equilibrium, through proper management of the Nigerian exchange rate policy. The country started operating the floating exchange rate system in 1986 after the introduction of SAP. It was expected that the country experience development but the reverse was the case because the country suffered consistent hopeless development situation as her naira depreciates often against other foreign currencies, especially the dollars which was universally accepted as the global medium of exchange. Before the floating system was introduced, $1=NO.89 but after that in 1966 we have $1=N22.05 and even today we have $1=N150.7 .This is quite disheartening, regardless of the effort of the government of Nigeria through the activities of the regulatory body such as the establishment of second tier foreign exchange market (SFEM) in 1986 and interbank foreign exchange market (IFEM) in 1989 and currently the foreign exchange market (AFEM) in 1995.

Nigeria is an Agricultural and oil rich nation but characterised by Political instability, corruption, poor

An increase in spending leads to an appreciation of the real exchange rate, as the government is using external resources to drive up demand for local goods and services. In the event of a resource windfall, there would often be a currency crisis which would ultimately lead to a shrinking of money and credit, which could precipitate a recession (Frankel, 2010). There is a direct relationship between resource windfall, economic growth and a country’s exchange rate. In Nigeria for example, there is an overdependence of the economy on oil revenue. The local currency is pegged to the US dollar and as such, increases in oil prices have a direct impact on inflation rates. This predisposes the economy to a mismatch between the volatile revenues and the relative stable spending commitments, which in turn, means instability of government revenue. This has resulted in the movement of labour and capital from the agriculture industry into oil and gas.

Due to Nigeria’s corrupt government, their citizens are deprived of the steadly revenue that the country makes thru the oil companies operating in their country. Most profits are taken from the public and are kept held with Nigerian officials. People in the Nigeria are currently living in extreme poverty. Government officials are taking all of the profits made from the sales of oil leads to a horrible infrastructure. Nigerian citizens are unable to have access to electricity and water. On another note, CIA World Factbook states that the literacy rate in Nigeria is currently seventy-two percent and females at fifty percent (CIA Work Factbook). Due to the corruption of government officials, making it hard for Nigeria to create growth within

The production and export data for this work was retrieved from the Nigerian National Petroleum Corporation (NNPC) database, the regulating body for the Oil and Gas industry, beginning from Q1, 2005, to Q4, 2013. I also collected crude oil prices from the British Petroleum website. Although the Amnesty Program led to a significant increase in oil production, it does not necessarily suggest it is the best policy that could have been adopted due to its challenges. Introduction The Niger Delta region, the Nigeria crude oil base, had witnessed numerous protests at various times by its citizens over resource wealth and control.

including Nigeria. This study concentrates on one part of the debate, investigation of the causes of valuation

According to statistics, “it is estimated that demand and consumption of petroleum in Nigeria grows at a rate of 12.8% annually. With an export industry with a substantially growth rate as Nigerian petroleum a lot of people would expect such a country to be moving forward in the development process, but it is not nearly so for Nigeria. It is unfortunate that the petroleum in the country is unavailable to the Nigerians,worst; it is so costly that domestics wouldn’t even consider it. This is due also to the fact that most of the oil rigged from the deepwater drilling is extracted by multiple oil companies of different nations and then refined overseas. So basically it becomes a situation where the natural resources are reaped away from the poor country materialized in the dominant countries and then price prohibitively high. Very rarely on special occasions a small account of the petroleum is distributed to the somewhat 200 million people in the country. Though

The first commercial discovery and operation of oil and gas in Nigeria commenced effectively in 1956. Since then, the Nigerian economy has over time become largely dependent on petroleum. Petroleum accounts for about one-third of the country’s Gross Domestic Product (GDP), 76% of government revenue, and 95% of the foreign exchange earnings. Nigeria is the 11th largest crude oil producer in the world, and the largest crude oil producer in Africa contributing about 3% of the global crude oil production . Nigeria is also the 9th country in terms of gas reserves in the world, having the largest gas reserves in Africa, contributing about 8% of the global liquefied natural gas supply . Despite these impressive figures, 70% of Nigeria’s domestic product demands are met through importation. This cost the country around $62 billion in 2014 which was higher than what the country received (averagely around $56 billion) from crude oil exports in the same year. As at 2014, Nigeria imported 886 million barrels of petroleum products, making it the 13th largest petroleum importer in the world. For each barrel of petrol imported, Nigerian government paid at least $8 per barrel, which tallied the total fuel subsidy payment to about $7 billion in 2014 .

Doug Addison (unpublished) further explained that the Nigeria economy is not merely volatile; it is one of the most volatile economies in the world (see figure 1 below). There is evidence that this volatility is adversely affecting the real growth rate of Nigeria’s gross domestic product (GDP) by inhibiting investment and reducing the productivity of investment, both public and private. Economic theory and empirical evidence suggest that sustained high future growth and poverty reduction are unlikely without a significant reduction in volatility. Oil price fluctuations drive only part of Nigeria’s volatility policy choices have also contributed to the problem. Yet policy choices are available that can help accelerate growth and thus help reduce the percentage of people living in poverty, despite the severity of Nigeria’s problems.

The methodology will be carried out using secondary data mainly from the Central Bank of Nigeria (CBN) Statistical bulletin, the National Bureau of Statistics (NBS), the Nigerian National Petroleum Corporation (NNPC) and a few from the CIA World Fact Book, World Development indicators (WDI) and, Organisation of Petroleum Exporting Countries (OPEC) for the period of 1980-2013. The variables to be used include; Gross Domestic Product growth (GDP Growth), Domestic Crude Consumption, Crude Export, Manufacturing Growth, Domestic Savings, Export Growth, Foreign Direct Investment (FDI) Net Inflows and Agricultural Growth. They will be assessed in two sets with different dependent and explanatory variables:

AN EMPIRICAL ANALYSIS OF THE IMPACT OF TRADE ON ECONOMIC GROWTH IN NIGERIA MIKE I. OBADAN

In Nigeria, the return to democratic rule in 1999 led to a myriad of programmes and strategies that were aimed at refocusing the face of the economy so as to resolve the difficulties which years of military rule had placed on it. This reform was, conceptualized principally in the form of a medium term development strategy called the National Economic

Nigeria is a country of promise that is hampered by a series of huge challenges. One of the most pervasive and destructive issues facing Nigeria is the chronic level of corruption. Africa’s most populous country with over 170 million people, modern Nigeria emerged from British colonialism gaining full independence in 1960. After many years of military rule, a 1999 constitution heralded a move to a civilian democratic government which has been in place ever since. (Africa:Nigeria, 2013)

In Nigeria, economic liberalization through deregulation and privatization, has been implemented for various reasons, such as the demand for efficient and effective Public Enterprises, reduction in external borrowing, stronger capital markets, and improve accountability, but most important of all, for generation of employment and sustainable livelihoods for the betterment of Nigerian welfare (World Bank, 2013).

Nigeria is Africa’s leading producer of oil and the seventh largest producer of crude oil in the world, and equally endowed with other numerous natural resources. But rather than utilizing its resources for maximum development, the country is unfortunately bedevilled with how to efficiently and effectively distribute oil revenues in an equitable manner. The revenue allocation phenomenon in Nigeria is basically the issue of distribution of national (resources) revenue, mobilized by the central federal government. And as far as the revenue allocation debacle is concerned, the haggling is between those who bake the national cake (major contributors to national revenue) and those at the helm of affairs to allocate it. There