Oil theft affecting govt finances, naira stability –MPC member

Massive oil theft, among other challenges, is affecting government finances and threatening naira stability.

The Central Bank of Nigeria disclosed this in a report by a member of the Monetary Policy Committee, Prof. Mike Obadan, who dealt with the topic ‘Is derugulation the solution to the forex / exchange rate problem?’

Obadan, a professor of economics and also chairman of Goldmark Education Academy, Benin City,  said, “For a long time, the oil sector has contributed over 90 per cent of the nation’s foreign exchange earnings and external reserves accretion.

“It has also been a significant contributor to government’s naira revenue through crude oil and gas export receipts.

“But for some time now, this has not been so due to two factors: huge volume of crude oil theft which has prevented the country from meeting even the OPEC-approved production quota, and inability of the NNPC, for many months, to make any remittance from direct oil export sales into the federation account and external reserves account.

“These are alarming developments which have adversely impacted government’s finances, external reserves accretion and exchange rate stability.”

He said a key challenge to effective forex management remained the pronounced low productivity of the economy and because of this, the economy was not able to generate enough foreign exchange to meet the high demand for it to import goods and services.

Continued excess demand, he added, had heightened pressure on the foreign exchange market and exchange rate.

He said this suggested the strong necessity to boost the productive and earning capacity of the economy.

The solution to the foreign exchange market challenges, he added, was not clean floating of the national currency.

Rather, he said, the solution derived from what needed to be done in the short- and medium/long-term to increase foreign exchange reserves and hence strengthen and stabilise the naira exchange rate.

He said the question might be asked on why the exchange rate was not stable in the current situation of high crude oil prices.