The collapsed price of oil is putting pressure on oil exporters around the world, from Canada to Kuwait. But perhaps no country is less prepared to survive prices at about $30 a barrel than Nigeria, which until a few years ago relied heavily on petroleum exports for its revenue. While countries like Saudi Arabia and Russia have saved past oil profits for rainy days, Nigeria has no such insulation. What’s worse is that Nigeria is especially dependent on imports of basic goods.
The cracks are starting to show: While the official rate doesn’t reflect it, Nigeria’s currency, the naira, is the world’s worst performing this year.
The economic troubles could hardly have come at a worse time. Last year, Nigerians elected Muhammadu Buhari as president after he ran on a zealous anti-corruption platform. Unfortunately, Mr. Buhari’s insistence on maintaining the peg at the current official exchange rate is not only crippling production, it is also encouraging corruption. He should abandon it as soon as possible and allow the naira to devalue.
Nigeria has pegged the naira to the dollar for decades, adjusting the exchange rate according to international supply and demand. But even as Nigeria’s economy has faltered, since last spring the peg has remained fixed at around 198.5 naira to the dollar. This rate is being maintained at the president’s insistence, undermining any notion of central bank independence.
To keep the rate fixed, the central bank has to preserve its foreign currency reserves, a difficult task as oil export revenue has fallen. How does it do that? By making it more difficult for Nigerians to obtain hard currency at the official rate. Primarily, the central bank has restricted access to foreign currency to importers who can demonstrate that the goods they’re bringing into Nigeria are necessary.
But Nigerians are innovative. A large parallel currency exchange has taken shape, in which importers trade naira for dollars at up to twice the official rate. The trade is too blatant to be called a black market. Last month, for example, I saw several currency exchange businesses at the Lagos airport that offered 380 naira to the dollar. Nigerian newspapers even include reports of the unofficial exchange rate.
The Buhari government hopes that the fixed exchange rate will prevent inflation. Yet inflation has risen sharply to the highest rates in almost five years. The prices of many imported goods have almost doubled, suggesting that they reflect the black market exchange rate rather than the official rate.
I recently saw this problem firsthand when I visited one of the country’s largest manufacturers of cardboard box packaging. Its production lines were either slowed or shut down. Thousands of employees were seeing their hours, and wages, cut back. In some cases, the company had been unable to import materials like labels. In other cases, the company’s customers had run out of items to box.
This is how bad policy turns a currency crisis into a recession.
What’s more, rationing foreign currency creates the wrong type of competition. As imports become more expensive, Nigeria’s companies should be looking for new ways to produce with fewer imports. They’re not. Instead, businessmen are trying to use their political networks to compel the central bank to sell them dollars at the low official rate, to deny dollars to their competitors, or both. The Economist recently reported that bank officials levy a 30 percent charge for the favor. Not only are these schemes a bad use of entrepreneurial cunning, they also undermine hopes for the corruption-free Nigeria this president promised.
Buhari says that devaluing the naira would hurt too much, that the imports on which Nigerians depend would become expensive, and rising prices would damage households across society. Usually, the pain of devaluation comes with a silver lining of promoting exports. But Nigeria hardly exports anything other than oil and gas. In fact, it often can’t produce what it needs for itself, even goods it should be exporting, like cereals and gasoline. In other words, as Mr. Buhari notes, devaluing the naira would bring about the worst effects of a weak currency, inflation, and provide none of the best, like increased exports.
Buhari must be frustrated. His predecessor, Goodluck Jonathan, enjoyed oil prices over $100 for most of his presidency and oversaw some of the highest government revenues in Nigeria’s history. He also issued three bonds on international markets in favorable global capital markets. Conditions at the time were excellent for building Nigeria’s domestic production capacity.
Mr. Jonathan also presided over a systematic looting of the public coffers swollen by borrowing and the oil surplus. In his presidency, over $20 billion is said to have vanished from the national oil company. The rest of the surplus expanded government payrolls, especially in the run-up to elections, and funded questionable building projects, often never finished.
Buhari’s administration has proposed a sensible budget, issued plans for incentives to invest in agriculture and mining, and is seeking investors to build more energy infrastructure. But none of these plans will be possible if the government maintains an artificial exchange rate. If Mr. Buhari really wants to build credible and transparent institutions, he should start by giving the central bank the independence to manage the currency and foreign reserves and get it out of the business of deciding what goods can and cannot be imported, or which firms can obtain foreign currency.
Buhari has loudly proclaimed his commitment to fighting corruption. But his view that he can protect Nigeria’s economy from global macroeconomic headwinds through an exchange rate peg borders on superstition. He has been told that his anti-corruption campaign is not an economic policy, but he may be more interested to hear that his economic policy is a petri dish for corruption. [myad]

The collapsed price of oil is putting pressure on oil exporters around the world, from Canada to Kuwait. But perhaps no country is less prepared to survive prices at about $30 a barrel than Nigeria, which until a few years ago relied heavily on petroleum exports for its revenue. While countries like Saudi Arabia and Russia have saved past oil profits for rainy days, Nigeria has no such insulation. What’s worse is that Nigeria is especially dependent on imports of basic goods.
The cracks are starting to show: While the official rate doesn’t reflect it, Nigeria’s currency, the naira, is the world’s worst performing this year.
The economic troubles could hardly have come at a worse time. Last year, Nigerians elected Muhammadu Buhari as president after he ran on a zealous anti-corruption platform. Unfortunately, Mr. Buhari’s insistence on maintaining the peg at the current official exchange rate is not only crippling production, it is also encouraging corruption. He should abandon it as soon as possible and allow the naira to devalue.
Nigeria has pegged the naira to the dollar for decades, adjusting the exchange rate according to international supply and demand. But even as Nigeria’s economy has faltered, since last spring the peg has remained fixed at around 198.5 naira to the dollar. This rate is being maintained at the president’s insistence, undermining any notion of central bank independence.
To keep the rate fixed, the central bank has to preserve its foreign currency reserves, a difficult task as oil export revenue has fallen. How does it do that? By making it more difficult for Nigerians to obtain hard currency at the official rate. Primarily, the central bank has restricted access to foreign currency to importers who can demonstrate that the goods they’re bringing into Nigeria are necessary.
But Nigerians are innovative. A large parallel currency exchange has taken shape, in which importers trade naira for dollars at up to twice the official rate. The trade is too blatant to be called a black market. Last month, for example, I saw several currency exchange businesses at the Lagos airport that offered 380 naira to the dollar. Nigerian newspapers even include reports of the unofficial exchange rate.
The Buhari government hopes that the fixed exchange rate will prevent inflation. Yet inflation has risen sharply to the highest rates in almost five years. The prices of many imported goods have almost doubled, suggesting that they reflect the black market exchange rate rather than the official rate.
I recently saw this problem firsthand when I visited one of the country’s largest manufacturers of cardboard box packaging. Its production lines were either slowed or shut down. Thousands of employees were seeing their hours, and wages, cut back. In some cases, the company had been unable to import materials like labels. In other cases, the company’s customers had run out of items to box.
This is how bad policy turns a currency crisis into a recession.
What’s more, rationing foreign currency creates the wrong type of competition. As imports become more expensive, Nigeria’s companies should be looking for new ways to produce with fewer imports. They’re not. Instead, businessmen are trying to use their political networks to compel the central bank to sell them dollars at the low official rate, to deny dollars to their competitors, or both. The Economist recently reported that bank officials levy a 30 percent charge for the favor. Not only are these schemes a bad use of entrepreneurial cunning, they also undermine hopes for the corruption-free Nigeria this president promised.
Buhari says that devaluing the naira would hurt too much, that the imports on which Nigerians depend would become expensive, and rising prices would damage households across society. Usually, the pain of devaluation comes with a silver lining of promoting exports. But Nigeria hardly exports anything other than oil and gas. In fact, it often can’t produce what it needs for itself, even goods it should be exporting, like cereals and gasoline. In other words, as Mr. Buhari notes, devaluing the naira would bring about the worst effects of a weak currency, inflation, and provide none of the best, like increased exports.
Buhari must be frustrated. His predecessor, Goodluck Jonathan, enjoyed oil prices over $100 for most of his presidency and oversaw some of the highest government revenues in Nigeria’s history. He also issued three bonds on international markets in favorable global capital markets. Conditions at the time were excellent for building Nigeria’s domestic production capacity.
Jonathan also presided over a systematic looting of the public coffers swollen by borrowing and the oil surplus. In his presidency, over $20 billion is said to have vanished from the national oil company. The rest of the surplus expanded government payrolls, especially in the run-up to elections, and funded questionable building projects, often never finished.
Buhari’s administration has proposed a sensible budget, issued plans for incentives to invest in agriculture and mining, and is seeking investors to build more energy infrastructure. But none of these plans will be possible if the government maintains an artificial exchange rate. If Mr. Buhari really wants to build credible and transparent institutions, he should start by giving the central bank the independence to manage the currency and foreign reserves and get it out of the business of deciding what goods can and cannot be imported, or which firms can obtain foreign currency.
Buhari has loudly proclaimed his commitment to fighting corruption. But his view that he can protect Nigeria’s economy from global macroeconomic headwinds through an exchange rate peg borders on superstition. He has been told that his anti-corruption campaign is not an economic policy, but he may be more interested to hear that his economic policy is a petri dish for corruption. [myad]

The failure of the most recent Republican Revolution is now manifesting to every American and world leaders except for the current leadership of GOP. Even they may have doubts as expressed by their body language regarding the remaining Republican presidential candidates.
In this election cycle, party elders have shown their dissatisfaction with Ted Cruz, questioning his eligibility for the presidency of the United States; other party leaders have coalesced under a semi organization as the Stop Trump Movement due to the utterances of Mr. Donald Trump, who they believe does not represent GOP positions on the affairs of the nation and the world.
The harder GOP leadership had tried to steer the ship to the center as the grassroots have veered to the right.
For a perspective on how far things have gone awry, remember President Reagan in the city of Berlin standing tall and pointing to the Berlin Wall and yelling to President Gorbachev of Russia “tear down this wall” and compare it with Mr. Trump yelling that he would build up a high wall to stop Mexicans from entering US and that Mexicans would pay for the wall.
Both the one who would tear down a wall and the one who build up another wall were hailed. How hath the mighty fallen?
The above narrative represents the background on which GOP strategies ought to be revisited. It will require divine intervention for GOP to win this 2016 elections. GOP ought to refocus its attention to 2020 elections and try to snap the presidency from the Democrats then.
To say that the Republican Party will lose 2016 election in April of 2016, seven months before the context, is a bold or crazy prediction. But let nobody say that they were not told.
It is wise advice for GOP to refocus on 2020 now.
GOP is wrong because there is no Republican Party existing now. There is a collection of three groups pretending to be a party called GOP.
One of the groups is what is popularly known as The Tea Party. This group is an aggregation of confused individuals without political ideology; without political experience; and without any organization.
They have on their roster, names like Sarah Palin, Donald trump, Ted Cruz and others. But they have probably the largest grass roots following of the other splinter groups. This group has no tolerance for Blacks, Latinos, Muslims, immigrants, so-called illegal aliens, etc.
Another group would be the Traditional Republican Party. The members of this group are primarily the current leadership of House and Senate, the living party officials such as the past presidents, majority leaders of the senate, speakers of the House and most of the elder statesmen and women. They have clout but do not have the numbers among followers. The strength of this unit is that they have political ideology that binds them together, have had government experience, and some kind of organization. They can summon business leaders for help and can appeal to some independents. Their weakness is some consider them too central or in some cases as liberal hence their name as the liberal wing of the Republican Party which is a contradiction in terms for they were once considered as fire brands.
The last wing is those who are “none of the above.” There are elements of the first group they like but not all; there are also elements of the second group they like but not all; and there are elements of the Democratic Party ideologies they like. They are like bats neither day birds nor night birds; neither land animal nor birds. These people are often referred to as Republicans in Name Only. Though their numbers are small, they usually make the difference in close elections, especially in primaries.
Most importantly. they are concentrated in a few Midwest states that are battle ground states in both the primary and general elections.
The national Republican convention is in July in Cleveland. The Republican candidate would emerge during this convention. If Mr. Trump or Mr. Cruz get to the convention with enough delegates to win at first ballot, he would have the tough job of uniting the three groups together in four months. There will probably nodding of heads in support but neither man can win the soul and support of the leadership group or of those Republicans in Name Only (RNO). Most polls show a double figure win advantage for either of the Democratic Candidates.
The danger for the GOP is that the senate might tumble over in the disaster that would follow.
Obama would have exerted his sweetest revenge. And senator McConnell who had vowed to make him a onetime failed president would eat his words as he watches Obama’s 3rd term, most of which he would have been a Minority Leader.
US’s two party structure has been tested more than a few times and each time it passes the test with excellent grades. This is not the first time someone thought that one of the parties would go under, but each time the assumed dead party comes roaring back to life. GOP must now forget about 2016 and start looking for a Ronald Reagan who would bring the fractured party back together. It will take at least the first term of the democratic president to accomplish this goal.
Some of the ways to do this will include:
1. With most of minority groups growing faster than “EU White Population” which has been the base of GOP, it follows that GOP would try to make in ways in both the Hispanic and Black communities. Statements like deporting immigrants; building walls, calling them names; etc. should be paseo.
2. The Party would need to find ways to reduce the influence of the Tea Party in its affairs. The world is now a global village and inward thinking of the TP ought to be reversed. In this election, much of the world has been alarmed by the words-assault on Muslims, by refusal to participate in refugee crisis in EU and Mideast; by the suggestion to use torture in suspect’s interrogations. These are offensive to International Laws and portrays USA as a rogue nation.
3. The division in GOP causes divisions in the entire body politics. Overall US interests must override petty party views. The country needs a common voice and this common voice can only be found at the center. Fringe elements of the right and left must be let go so that the nation can move forward.
There are many more things to be done, but the above should be the starting point. The party of Lincoln should regain its posture when it fought to unify the country and to end slavery. Those were the “times when men were men”.
Will Speaker Paul Ryan and Majority Leader Senator McConnell be up to the task?
We will see.

Benjamin Obiajulu Aduba wrote in from Boston, Massachusetts, USA. [myad]