The vaulting exchange rate of the dollar to naira has been identified as the main cause of the backward trend of Nigeria’s economy.
This was revealed by the executive secretary of the Major Oil Marketers Association of Nigeria (MOMAN) Mr Obafemi Olawore at a roundtable forum organized by NewsDirect Newspaper with the theme: Government Policies and the Impact of Falling Crude Oil Prices on Businesses at Eko Hotel.
Mr Olawore said that if the country did not do anything to curb the rising exchange rate of dollar to naira, the country’s economy may likely go into recession.
According to him “some months ago, the Dollar-Naira parity was N155, at that point, government fixed a price. But just look at this scenario, if you go to the PPPRA template, their website, you will find out that as at January when they released their pricing template, the exchange rate they used was $171.36,at that time C&F exchange of petroleum was $490.51 per metric tonne, they multiplied the dollar by the exchange rate and divided it with the convention factor of 1341, which is the quantity of litres in one metric tonne of petrol. They did that and arrived at a landing cost of N72.64 per litre”.
He continued “the average Interbank rate was $188 some days ago, now the same petrol that gave us the landing cost of N72.64 will give you N78.72. If the exchange rate of the dollar is N200 today, then the landing cost of petrol will be N63.11.
He further stated that the exchange rate of the dollar to the naira is rising rapidly and the country should stem the tide before it goes out of hand.
“The most vital variable in all this is the exchange rate, if we are able t hold the exchange rate, investors will be able to plan and hold their own but if we are not careful and the exchange rate goes up to N250, then the government will find it difficult to reduce the price to commensurate with the increase in exchange”.
He added that “if government had not reduced pump price by N10, marketers would have been paying back to government an equivalent of N7.30, that is what is called over-recovery, but the moment they reduced it, the exchange rate went up and we are back to subsidy situation”.
Also speaking at the event was the executive secretary of National Association of Small
and Medium Enterprise (NASME) Mr Eke Ubijie who centered his argument on the premise that the country could not have been affected by the falling oil crisis if they had not relied heavily on the oil and gas sector and paid little attention to other sectors of the economy that could generate revenue too.
According t him “Our economy has remained a mono-economy because we rely solely on oil. The Oil and gas has misled us to an extent, it made us think that we are rich, it made us pay little attention to the non-oil sector”.
He added that the president of the United States, Barak Obama gave the hint when he visited South Africa last year that the US will stop buying Nigeria’s oil, but Nigerians paid little attention to the supposed warning and now reaping the outcome.
He later advised that the government should pay attention to the non-oil sector to help alleviate the economic crisis.
“If we pay attention to the non-oil sector, promote it, put infrastructures in place, I am telling you whether price of oil rises or falls, it will not affect the economy of the nation.