The Nigeria’s Fx Crisis: Overarching Consequence of Insecurity and Structural Deficiency

Must Read

How To Block Your Bank Account And SIM Card In Case Of Emergency

Losing your phone and wallet or having them stolen can be very frustrating. However, in case that happens to...

List of United Bank for Africa (UBA) Sort Codes & Branches (with addresses) in Nigeria

The sort code is a number that usually identifies both the bank and the branch where an account is held. The sort...

List of Access Bank Sort Codes & Branches (with addresses) in Nigeria

The sort code is a number which usually identifies both the bank and the branch where an account is...
- Advertisement -

The Nigerian Naira has lost close to 30% in value within the last one year, and more than 200% in the last 10 years. The situation has led to a spike in capital outflow, high unemployment, the alarming rate of inflation and other direct and indirect consequences associated with exchange rate crisis.

While greater attention has been placed on COVID-19 as the root cause of the diverse economic challenges this year, the current FX situation should be looked at from diverse perspectives; primarily, the existing structural and policy challenges that have been limiting the country’s FX earnings over the years and also the COVID-19 induced shock on global energy demand.

Santa came early but with T&C
Afolabi Sotunde Illustration Naira

The COVID-19 Effect

Earlier this year, as a result of restrictions imposed by countries when COVID-19 was declared a global pandemic, the fall in global energy demand put pressure on the oil price and we saw Brent down by about 57% closing below $20 per barrel.

Nigeria, an oil-dependent country with over 81% export earnings from oil, had earlier benchmarked the oil price at $60pb in the 2020 budget with daily production estimated at 2.18mn barrels per day.

- Advertisement -

The oil crisis forced a review of the oil benchmark to $28 per barrel. Consequently, the Nigerian government oil export between January and May contracted by about 77%. This put pressure on the FX reserve and led to the first devaluation of the year despite the $3.4bn loans from the IMF.

Read Also:  FMDQ RECORDS ₦115.68 TRILLION TURNOVER IN 8 MONTHS

The official exchange rate was reviewed from N306/$ to N360/$, while sales to the BDC was pegged at N379/$ and then followed by suspension of FX sales to the BDC with limited intervention across different FX windows.

The Nigeria’s Fx Crisis Brandspurng Overarching Consequence of Insecurity and Structural Deficiency

Is COVID-19 the Main Factor behind the current FX Crisis?

While we can’t neglect the adverse impact of COVID-19, a look at the country’s trade account last year shows that the country started a trade deficit run from Q4-2019 despite the moderately buoyant oil price in the year.

- Advertisement -

From a N2.4trn trade surplus as of the 3rd quarter of 2019, the country recorded a trade deficit of about N500bn in the 4th quarter. Similarly, from the latest 3rd quarter trade data released by the NBS recently, the country recorded a N4.6tn trade deficit within the first 9 months of this year.

Even with the COVID-19 restrictions on international trade, the country still recorded a 19% growth in imports despite a 37% and 38% decrease in crude oil and non-oil export respectively. This tells of the overarching consequences of structural inadequacy that has been limiting domestic production and thereby leading to a trade deficit with unnecessary pressure on the currency.

Despite the various intervention into the agriculture sector via the CBN Anchor Borrowers Program (ABP) and other development finance initiatives, the import of agricultural goods still increased by a whopping 109% compared to Q2-2020 with agricultural export dropping by 21% in Q3, 2020.

The Nigeria’s Fx Crisis Brandspurng Overarching Consequence of Insecurity and Structural Deficiency

- Advertisement -
The Nigeria’s Fx Crisis: Overarching Consequence of Insecurity and Structural Deficiency - Brand SpurThe Nigeria’s Fx Crisis: Overarching Consequence of Insecurity and Structural Deficiency - Brand Spur

Subscribe to BrandSpur Ng

Subscribe for latest updates. Signup to best of brands and business news, informed analysis and opinions among others that can propel you, your business or brand to greater heights.

- Advertisement -

LEAVE A REPLY

Please enter your comment!
Please enter your name here

This site uses Akismet to reduce spam. Learn how your comment data is processed.

The Nigeria’s Fx Crisis: Overarching Consequence of Insecurity and Structural Deficiency - Brand SpurThe Nigeria’s Fx Crisis: Overarching Consequence of Insecurity and Structural Deficiency - Brand Spur

Latest News

SurveyMonkey to Report Q4 and Fiscal Year 2020 Financial Results on February 11, 2021

Jan. 21, 2021 - SurveyMonkey, a leader in agile software solutions for customer experience, market research, and survey feedback,...

Keeping an eye on Biden’s plans for Africa

President Joe Biden has been sworn into office, ushering in a new administration, new foreign policy and a new approach to US trade and...

The Trade Desk Appoints Benson Ho as Senior Vice President, North Asia

SHANGHAI, CHINA - Media OutReach - 22 January 2021 - Global advertising technology leader, The Trade Desk, today announced the appointment of Benson Ho as Senior Vice President of North Asia. In this role, Ho will lead the company's business and growth strategy in the North Asia region, covering Greater China, South Korea and Japan. Ho will report to Tim Sims, Chief Revenue Officer.

 

 The Nigeria’s Fx Crisis: Overarching Consequence of Insecurity and Structural Deficiency - Brand Spur

 

Ho brings vast leadership experience in the Asian media industry, most recently as Chief Data Strategy Officer at Tencent Marketing Solution, an important early inventory partner of The Trade Desk in China. Prior to that, he served as Amnet's chief consultant and programmatic expert to Dentsu Aegis Network. He has also served in senior leadership positions at Sizmek, GroupM and Digitas.

 

"One of The Trade Desk's biggest priorities is Asia, and with Benson joining our team, we're confident he will help accelerate our growth strategy in the region," said Tim Sims, Chief Revenue Officer, The Trade Desk. "Benson brings experience and expertise of data-driven advertising, as well as his invaluable relationships with key partners and advertisers, that are specific and unique to the Asian market. I look forward to partnering with Benson as we execute our next phase of growth in the region."

 

"I am delighted to join The Trade Desk and build on the success the company has had in North Asia," said Ho. "The advertising industry is at a turning point right now, and there's enormous opportunity for brands to leverage global best practices and connect with consumers in new ways. It's very exciting to be a part of the team that's delivering a unique solution and expertise to global advertisers in the region."


About The Trade Desk

The Trade Desk™ is a technology company that empowers buyers of advertising. Through its self-service, cloud-based platform, ad buyers can create, manage, and optimize digital advertising campaigns across ad formats and devices. Integrations with major data, inventory, and publisher partners ensure maximum reach and decisioning capabilities, and enterprise APIs enable custom development on top of the platform. Headquartered in Ventura, CA, The Trade Desk has offices across North America, Europe, and Asia Pacific. To learn more, visit thetradedesk.com or follow us on Facebook, The Nigeria’s Fx Crisis: Overarching Consequence of Insecurity and Structural Deficiency - Brand SpurTwitter, and LinkedIn. 

 

The Nigeria’s Fx Crisis: Overarching Consequence of Insecurity and Structural Deficiency - Brand Spur

DJ Khaled announced as International Host of the MAMAs Kampala 2021

Grammy® Award-winning global sensation, DJ and record executive, DJ Khaled, who is best known for his hip hop and R&B hit anthems, will be the international...

Entrepreneurialism alive and well in the time of the pandemic

Entrepreneurial spirit is up among women and younger adults. One-third of adults across the world show a very high level of entrepreneurial spirit, according to...
- Advertisement -
BrandsPur Weekly Cartoons
- Advertisement -The Nigeria’s Fx Crisis: Overarching Consequence of Insecurity and Structural Deficiency - Brand SpurThe Nigeria’s Fx Crisis: Overarching Consequence of Insecurity and Structural Deficiency - Brand Spur