Many countries of the world are fervently seeking ways to cushion the effect of oil prices that have fallen rapidly since mid-year 2014. The plummeting oil prices are largely deemed to be an effect of huge oil glut, with subliminal effects of global growth projections. These recent developments have been predicted to affect global economy and inflation, an effect which is currently biting hard on the economy of many countries especially developing nations.
Last year, many countries, having reconciled with the harsh economic realities, began making adjustments and reviewing their national economic policies to build some form of defense against the effect of dropping oil prices.
Similar to the falling oil prices is the plummeting naira. Nigeria’s position as the largest economy in Africa after rebasing its Gross Domestic Product (GDP), may be threatened by the continued fluctuation and depreciation of its currency. There have been disheartening speculations about the continuous plunge of the Nigerian currency and the falling oil prices with ripple effect on the general economic welfare of the country. An economy that draws the bulk of its export revenue from the oil sector, its revenues keep plunging as prices drop and governments are slashing spending, shunning construction of new projects and delaying payments of civil servants’ salaries. Price trends are peculiar to commodity-dependent nation, like Nigeria.
It is no news that the firming of the dollar and constant rise of other foreign exchange against the naira is not only affecting the cost of doing business but may also be driving many organisations into insolvency as a result of accumulated debt and the inability to assess fund or pay their foreign partners. Speculations reveal that if this is not contained, it may lead to reputational risk and the eventual loss of jobs.
Despite strong opinions about the naira and the predictions of an inevitable devaluation, President Muhammadu Buhari has stated vehemently his stance, shunning all alternative standpoints by economic mongers.
Although, many policy makers are on their toes trying to fix the situation, the Nigerian Senate, on one hand has expressed concern over the salient issue and has constantly sought ways to alleviate the pressure of the acute foreign exchange crisis on the Nigerian economy. One of its efforts was summoning the Governor of the Central Bank of Nigeria, Godwin Emefiele, to give an account of the regulatory financial institution’s role in remedying the current economic crisis.
Emefiele’s presentation reflected the current global economic downturn, characterised by external shocks, including the sharp decline in commodity prices, the geographical tensions along important global trading routes and tightening of monetary policy in the United States. The apex bank governor was, however, optimistic that the eventual rise of the naira against the dollar and other foreign currencies, was near.
Senate President, Bukola Saraki, urged the government to focus on other revenue sources like taxes, agriculture, manufacturing, tourism and solid minerals—resource fields that remain largely untapped. Saraki revealed that focusing on these areas will contribute to the defense of the naira against the dollar and other currencies. He expressed optimism that the naira will stabilise if given the necessary support and the diversification of the currency.
On the flip side, optimistic economists are suggesting that economic policies of developing countries should be reviewed to begin to seek opportunities and strategically begin to discover the upside of the downturn.
At a leadership conference organised by TL First Integrated Management Group, a leading global consulting firm, former adviser to former President Goodluck Jonathan, Dr. Christopher Kolade, had emphasised the importance of Nigerian economic policy makers to begin to re-engineer their focus on the gains of the present economic downturn.
While urging Nigerians to quit with the lamentation of hardship, he sought the re-orientation of Nigerian mindsets to start discovering great benefits in developing the country’s resources and diversifying in different core areas that can be developed to create revenue-generating causes. He added that should Nigerians focus on these new areas of development and cut down on importation, issues of foreign exchange and plunging oil prices will be a thing of the past. Global Economist and expert on management trends, Professor Richard Scace attested to this when he stated that leadership is understanding times, seasons and trends and knowing actions to stay ahead.
In the words of notable International Economist and Chartered Accountant, Dr. Olu Olasode, “economic downturns provide opportunities for repositioning, strength and growth. Leaders of today need to rethink strategies, realign priorities, block leakages, and stress-test institutional readiness for rebound and growth.” Now is Nigeria’s time to awaken its ingenuity and rise against the backdrop of current global economic challenges.
Uwisike works at TL First Group, a consulting organisation