THE Financial Services Leader and Chief Economist at PwC Nigeria Andrew Nevin says he foresees a positive effect on the nation’s parallel market rates following the current rise in oil prices.
Early this week, Nigeria’s most valued crude grade, Bonny Light, rose to $95 per barrel, with the expectation it could soon hit the $100 mark.
Nevin, speaking at the 2022 FATE Annual Business Outlook on Thursday, said the parallel markets would witness a positive change despite the failure of the Central Bank of Nigeria to harmonize the exchange rates.
He said, “I don’t think there would be a harmonization of the exchange rate this year before the elections. I don’t see a major policy shift before the elections, so be prudent with the risks you take. I think as the oil proceeds from $90 begin to roll in, there would be a positive effect on the parallel rates.”
In a separate event last week, the Director-General, Budget Office of the Federation Ben Akabueze explained that naira devaluation and subsidy dragged the revenue made from oil down.
According to Akabueze, Nigeria ended with oil at 50 per cent of the target despite oil prices significantly higher than the budget benchmark.
“We made no provision for subsidy because in 2020 there was a pronouncement that subsidy was gone. Unfortunately, subsidy resurfaced and the combination of oil prices and devaluation in naira got to a point that it didn’t seem feasible to continue to adjust the pump price of petrol.
“The subsidy scheme operates as a deduction upfront from the gross oil and gas revenues before it even hits the Federation Account to be shared. We lost over a trillion naira in terms of impact in 2021. Oil revenues came short by that much. The other reason oil revenues came short was production. For 2021, it came in below the 1.86 million barrels per day that we projected,” he said.
Yesterday, the exchange rate between the naira and the US dollar closed at N415.15/$1 at the Investors and Exporters (I&E) window, as observed from the FMDQ Security Exchange.
Meanwhile, the International Monetary Fund (IMF) has urged Nigeria’s fiscal and monetary authorities to remove fuel subsidies and official exchange rates.
Joseph OLAOLUWA
The ICIR
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