Why Nigeria continues to earn less foreign exchange – Emefiele


The significant decline of Nigeria’s foreign exchange earnings as well as revenue accruable to the federation account have persisted due to declining crude oil prices at the international market, the Governor of the Central Bank of Nigeria (CBN), Godwin Emefiele, has said.

He also attributed the decline to a cut in the country’s crude oil production quota in compliance with the Organization of Petroleum Exporting Countries (OPEC) resolution last April.

Also, the Minister of Finance, Budget and National Planning, Zainab Ahmed, has quoted the National Bureau of Statistics (NBS) as giving a projection that Nigeria’s economy is primed to relapse into the second recession n four years by contracting by about 4.2 per cent from the third quarter of this year.

With the economy already contracting by about 6.1 per cent in the second quarter, analysts have concluded that although the performance of the economy is expected to improve, another contraction in the third quarter would complete the three consecutive cycles required for an economy to go into recession.

Impact of COVID-19 pandemic

Following the outbreak of the coronavirus pandemic earlier in the year, the crude oil market was badly impacted, resulting in the crash in oil prices from an average of $60 per barrels to less than $20 in March and below $10 in mid-April.

To strengthen crude oil prices and firm up the market, the OPEC resolved to cut members’ production by about 9.7million barrels between May 2020 and April 2022.

In compliance with the OPEC resolution, Nigeria’s output dropped from about 1.81 million barrels per day in 2019 to about 1.412 million barrels per day (BPD) between May and June.

With crude oil prices dropping to less than $10 per barrel, earnings from crude oil exports also dropped significantly, with a commensurate impact on the monthly accruals in the Federation Account over the period.

Although crude oil prices are gradually firming up from about $19 per barrel in April 2020 to about $42 per barrel currently, the CBN governor said they are yet to return to the pre-pandemic average level of over $60 in January 2020.

Mr Emefiele, who spoke at the 13th Banking and Finance Annual Conference of the Chartered Institute of Bankers of Nigeria (CIBN) in Abuja on Tuesday, said the profound impact of COVID-19 on the Nigerian economy in the 1st and 2nd quarter created a dual challenge for policymakers.

“We had to address a public health…

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