The fall of oil price has left Nigeria stranded at the international market, with its major buyer refused to buy its oil for the first time in decades, courtesy of new oil and gas discovery in shale rocks. This means Nigeria will not hold much of US dollars, hence fall in foreign currency reserve. The Naira competitiveness has reduced due to deficit of currency demand and increasing currency supply at the market.
The new oil discoveries made the Nigeria oil less attractive, and thereby increasing the oil supplies, and reducing the power of cartel OPEC. Shall we expect continues fall in oil price? If yes, what would be the fate of Nigerian economy?
The un-seemingly Dutch Disease will manifest, as manufacturing sector is not attracting foreign currency to the economy. The over reliance on one sector as an export base will always expose the currency value to shock. The sole oil exports cannot boost the currency as the exports earnings are always exchanged for manufacturing and industrial products from outside.
The use of foreign currency in local trade, payments or gifts (largely by politicians) has contributed to higher unnecessary demand for dollar making it unnecessary more superior to Naira.
My question to Economists, if u r to sit in Monetary Policy Committee, what sort of short and long term measures would you recommend to absorb this shock.