Sequel to the fall-out in the adoption of a flexible exchange rate policy, a renowned Lagos based Economist, Henry Boyo, has predicted a further increase in Petrol Pump Price and Electricity Tariff, in the coming weeks.
Recall, that some experts had alluded to the fact that the policy was already dead on arrival, as its immediate good intentions of cushioning the long pressure on the naira against the United States dollar, has further created more problems for the already dying economy.
According to Boyo, barely eight hours after the commencement of the new forex regime, the cost of the “yet to be realised ‘regenerative’ benefits”, had already made horrendous dents on our economy.
“For a start, Nigeria’s erstwhile celebrated $510 billion Gross Domestic Product, GDP, immediately crashed below $350 billion, while per capita income crashed from over $1,000, to well below $600, as an attestation of deepening poverty.“In addition, the dollar value of all equity listed on the Nigerian stock market, also plunged from almost $48 billion on Friday, June 17, to below $25 billion on Monday, June 20, when the new forex regime commenced.“Invariably, all cash income and savings held in naira, also immediately fell below 60 per cent of their dollar purchasing value overnight.“Similarly, the equally celebrated over $25 billion accumulated national pension funds, also lost over $10 billion, just like that, to imperil the future welfare of our senior citizens”.
Boyo, noted that any offshore expenditure made now, will require almost 50 percent more naira to fund.
Presently, the President of Dangote Group of Companies, Aliko Dangote, has lamented that his Company lost N50 billion to the recently introduced Flexible Foreign Exchange Policy.
He said, “We have been badly affected like any other company.
“This week (last week), the Central Bank removed the peg that has held the naira at the official rate of 197 for the last 16 months, leading to a 30 per cent devaluation, as the currency traded freely on the Inter-bank market.“This devaluation alone, we have lost over N50 billion ($176 million).“The gas, which is our main source of power, is priced in dollars. If there is 40 percent devaluation, your price will go up by 40 percent.“Every single aspect of the production will go up by the percentage,” Dangote said.
Boyo in his submission, added that, there would be widespread default on foreign loans and outstanding import bills.
He decried that if the 2016 budget deficit of N2 trillion was also captured, the nation might ultimately need to allocate over 50 percent of earned revenue to service debts in the near future.
Speaking further, he noted that although the Nigerian National Petroleum Corporation, NNPC, had remained unexpectedly reticent on the impact of the new forex policy on fuel prices, the pump price of petrol cannot remain at N145 per litre, if the naira exchanges for N280 to $1, or more.
Boyo, added that unless the NNPC accommodates a new round of subsidies, which is not captured in the 2016 budget, petrol will soon sell beyond N200 per litre.
On the impact of the policy on electricity tariff, he said, the recently established electricity tariff structure was predicated on the naira exchange rate of N197 to $1.
With the recent devaluation, he noted that it will become unsustainable, and a further hike in electricity tariff will be inevitable, much against consumer expectation.
Following the negative impact of the policy on the nation’s quest to diversify its economy, Boyo concluded by saying, ”Real sector operations will become crippled, and any hope of economic diversification will gradually fade”.
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