W. Africa Crude-Trading quiet, Nigerian delays dampen demand – Reuters

LONDON Dec 30 (Reuters) – Oil futures were on track for their biggest annual gains since 2009 despite intraday losses, aided by OPEC’s agreement to cut production from early next year.

Still, demand for West African crude in spot trading was limited by holidays across Europe and uncertain demand in Asia. Gains in U.S. crude stocks showed by the U.S. Energy Information Administration this week also raised doubts over western demand for African oil in the near term.



* No fresh trading was reported despite some cargoes loading Jan. 15-20 being available for purchase.

* Loading delays on ExxonMobil’s crude exports, which included Qua Iboe and Erha, impinged on demand as buyers worried about demurrage costs.

* The bulk of the delays were because of strikes this month over layoffs by oil companies, traders said.


* Little fresh spot trading surfaced even as loadings proceeded on schedule.

* Media reports said that Angolan courts had cleared Isabel dos Santos to lead state oil company Sonangol, rejecting a legal challenge to her appointment by President Jose Eduardo dos Santos, her father.


* Indonesia’s Pertamina was running a tender to buy light sweet crude oil for March delivery. Traders expect it to be awarded in early January. (Reporting by Libby George; Editing by David Goodman)


Nigeria’s forex reserves decline 11.7 pct to $25.72 bln yr/yr by Dec 28 – Reuters

LAGOS Dec 30 (Reuters) – Nigeria’s foreign exchange reserves fell 11.7 percent to $25.72 billion by Dec. 28, from $29.13 billion a year earlier, central bank data showed on Friday.

However, the reserves showed a 4.2 percent increase month-on-month, up from $24.69 billion on Nov.28 – due to a slight recovery in global oil prices and a rise in the OPEC member’s oil production levels.

Nigeria’s oil production rose to 1.70 million barrels per day (mbpd) in November, up from 1.65 mbpd the previous month, which lifted the West African country forex reserves. (Reporting by Oludare Mayowa; editing by Alexis Akwagyiram)

Political Risks Leave Euro-Pound Analysts Most Divided on Record – Bloomberg

  • Forecasters divided with widest range of estimates in a decade
  • Currency threats ‘on both sides of the English Channel’: CIBC

For analysts trying to plot the course of the pound against the euro in 2017, the key decision is judging which side of the English Channel will see greater political turbulence.

Strategists are trying to pinpoint whether the U.K.’s exit process from the European Union or the rise of populism in the rest of Europe carries the bigger risk. The dichotomy is evident in Bloomberg’s survey of currency analysts, where the range between the highest and lowest year-end forecasts for euro-sterling is the widest going into a new year since at least 2006.

With central banks buying bonds and suppressing borrowing costs, currencies have become the main way investors reacted to political risk in 2016. Sterling is on track for its biggest annual decline against the euro since 2008, and the median forecast in a Bloomberg survey of economists sees the pair reaching 86 pence by the end of next year, with a range of 73 pence to one pound per euro.

“Clearly there’s a lot of political risk on both sides of the English Channel over the course of the next 12 to 24 months,” said Jeremy Stretch, head of Group-of-10 foreign-exchange strategy at Canadian Imperial Bank of Commerce in an interview earlier this month. “The legacy of 2016 will be that traditional presumptions in terms of politics and political risk have been turned upside down.”

The U.K. currency fell 0.2 percent to 85.33 pence per euro as of 7:41 a.m. in London on Dec. 29.

While the pound plunged to its lowest level versus the dollar in more than three decades after the U.K. voted in June to leave the EU, recent economic data have proven resilient. That’s prompted BlackRock’s deputy chief investment officer of global fundamental fixed income, Scott Thiel, to be positive on sterling. “So long as we don’t go down the road of a hard Brexit, the pound will continue to react relatively favorably,” he said at a media briefing this month.

The U.K. currency may also benefit from political turmoil across Europe. France’s National Front leader Marine le Pen, who wants to take the nation out of the euro, is likely to enter the two-person run-off vote for the presidency in May, polls show. In the Netherlands, far-right politician Geert Wilders is leading in the polls, despite being found guilty of inciting discrimination this month. Meanwhile, Italy faces both general elections and a referendum on labor reform. Some analysts say this means the euro may suffer more than sterling.

“Through the first half of next year, we think the main story will be that the pound benefits from the market’s focus switching more toward the political risk in Europe,” said Lee Hardman, a foreign-exchange strategist at MUFG, in an interview earlier in December. “The pound could benefit relative to the euro as it looks comparatively safe during that period.” He forecasts the euro will drop below 80 pence during the first half of 2017, a level not seen since Britain’s decision to quit the EU became known.

Europe’s Monetary Guardians Go Quiet as Politics Rules Stage

The pound may also be underpinned by any delays to Article 50 of the Lisbon Treaty, which will start the process of Britain leaving the EU, according to BlackRock’s Thiel. Prime Minister Theresa May has pledged to start the Brexit process formally by the end of March, a deadline which Thiel said was “challenging.”

Not everyone is so positive on the pound. For CIBC’s Stretch, a likely “deterioration in the macro fundamentals” coupled with Brexit-related uncertainty means the pound is in for a rough ride.

“Any sterling rallies we see into year-end provide better levels to go short,” London-based Stretch said. The pound could weaken toward 86 pence per euro by March 2017, he said.

Sterling is the year’s second-worst performer among major currencies, beaten only by the Mexican peso, and has weakened 13 percent against the euro and 17 percent versus the dollar this year. Traders assign about a 41 percent chance of euro-sterling reaching 80 by the middle of 2017 and only a 4 percent chance of parity in the same time-frame, according to Bloomberg’s options calculator.

Aside from the political risks, the pair’s outlook for 2017 may be determined by technical levels, according to Bloomberg FX strategist Vassilis Karamanis and technical analyst Sejul Gokal.

  • Key support for EUR/GBP is seen at 0.8176-17 (50 percent retracement of the 2015-2016 rally and the April 2016 high); 0.7883 (61.8% Fibonacci retracement of the 2015-2016 rally); 0.7565-21 (May 2016 low, 76.4% retracement of 2015-2016 rally) Resistance for the pair seen at 0.8857 (Nov. 4, 2016 low), 0.9049 (Nov. 2, 2016 high), 0.9415 (Oct. 7, 2016 high)


  • Leveraged investors and interbank desks went short euro on the break of support at 0.8700 versus the pound and still hold on to a large part of their positions, three traders in London and southern Europe say
  • Real-money investors look to fade rallies in the pair, albeit interest has receded since mid-December; fast-money accounts were seen buying the dip in the meantime, one of the traders says
  • Euro sentiment versus the pound, as seen in three-month 25-delta risk reversals, has rebounded from this year’s most bearish level –27 basis points in favor of euro puts hit on Dec. 15 — to trade Thursday at 28 basis points in favor of euro calls over puts. The risk reversal is a measure of market sentiment and positioning and is euro supportive across tenors
  • Some information comes from FX traders familiar with the transactions who asked not to be identified because they aren’t authorized to speak publicly

African Markets – Factors to watch on Dec 30 – Reuters

NAIROBI, Dec 30 (Reuters) - The following company announcements, scheduled economic
indicators, debt and currency market moves and political events may affect African markets on
    - - - - -
 *NIGERIA - The central bank to release its latest figures on
 the state of its foreign exchange reserves.
 *UGANDA - The statistics office to release consumer
 inflation data for December.
 *MAURITIUS - The central bank to auction 91-day, 182-day and
 364-day Treasury bills worth a total 700 million rupees. 
 Asian stocks looked set to end 2016 on an upbeat note, while
 profit-taking weighed on the dollar and the euro held near a
 two-week high after spiking early in the
 Oil prices rose in early Asian trade on Friday shrugging off
 a second consecutive week of U.S. crude oil inventory
 builds, with a U.S. Energy Information Administration (EIA)
 report late on Thursday indicating an unexpected rise in
 crude stocks.                 
 For the top emerging markets news, double click on
 For the latest news on African stocks, click on     
 Kenya's shilling and Zambia's kwacha are seen holding steady
 against the dollar in the next week to Thursday, while
 Nigeria's naira will likely weaken, traders said.
 South Africa's rand strengthened for a fourth consecutive
 session on Thursday and shares rose to a two-week high as
 emerging markets rallied on the back of a softer
 Nigeria's central bank sold about $1 billion on the forward
 market last week to clear a backlog of dollar obligations in
 selected sectors, traders said on Thursday, its largest
 special auction since a currency peg was removed in
 Kenya's shilling        was steady on Thursday and traders
 said it was seen weaker due to dollar demand from sectors
 like telecoms and manufacturing, while tight liquidity would
 limit its losses.            
 The Ugandan shilling UGX= lost ground on Thursday, pressured
 by strong importer and commercial bank dollar demand and
 scant inflows of the U.S. currency.            
 Angola's central bank kept its benchmark lending rate
 unchanged at 16 percent, it said on Thursday, citing falls
 in headline inflation.           

Money Market Reform Creates Arbitrage for Short-Term Investors – Bloomberg

  • Bond managers can earn extra half percentage point interest
  • Eurodollar futures trim risk in commercial paper trade

Money market reform has a silver lining for some investors.

Bond managers can earn more than half a percentage point of extra interest annualized by buying securities that money market funds are shunning now and by using derivatives to trim the risk, said Dan Dektar, chief investment officer at Amundi Smith Breeden LLC in Durham, North Carolina.

“This is one example of the things you can do in the money markets to improve returns,” Dektar said. The higher returns have “arisen due to safety-minded reform and not due to a deterioration in the soundness of the financial system,” he said. Amundi Smith Breeden manages around $10 billion of assets.

Rules that came into effect in October have dimmed demand for certain kinds of debt — in particular, short-term debt known as commercial paper, a near $1 trillion market of securities issued by companies including banks. The regulations are designed to make the funds safer after a major manager went under during the financial crisis.

Higher Yields

That lack of demand has driven yields higher on commercial paper maturing in six months, Dektar said. In recent weeks Amundi bought commercial paper issued by banks that yielded around 1.32 percent, for example, around the six-month Libor level and a more than seven-year high for the benchmark.

The Federal Reserve is raising rates — it hiked in December for the second time in a year, and the median forecast for voting members implies that the central bank will lift rates three more times next year. That risk can be hedged with Eurodollar futures, Dektar said.

An investor buying three-month commercial paper now earns about 1 percent, based on Libor rates. If the six-month yield is 1.32 percent, that implies that in the second three months of the note’s life, investors will receive an annualized rate of around 1.64 percent. Hedging out the risk of the second three months using Eurodollar futures costs 1.07 percent, meaning an investor can earn an annualized 0.57 percentage point for the second three months while taking relatively little interest-rate risk.“This is like buying Libor at 57 basis points over Libor,” Dektar said. “It illustrates how disjointed the market has become.” The scenario has occurred in previous years, though is usually associated with stress in the system, according to Dektar.

Credit Risk

There are risks to such a trade, as it means exposure to the underlying credit, according to Wells Fargo Securities LLC strategist Boris Rjavinski.

“You may be able to hedge the Libor component covering the life span of the commercial paper,” he said. “But what may happen is the credit spread of the entity issuing the paper widens, even if Libor doesn’t move. That creates a risk in the trade.”

In October, rules came into effect that require riskier money market funds to pass their paper losses on securities onto investors. Money market funds have historically allowed investors to buy and sell their shares at $1 apiece, which makes the funds seem safe and stable to customers. Under the new rule, if the funds are buying commercial paper and other non-government securities, they must record paper gains and losses daily on the securities they hold, and pass those gains or losses onto investors. That creates an incentive for investors in money market funds to gravitate to funds that buy only government debt.

    WEEKAHEAD-AFRICA-FX -Kenyan shilling seen steady, Nigeria’s naira could weaken – Reuters

    NAIROBI Dec 29 (Reuters) – Kenya’s shilling and Zambia’s kwacha are seen holding steady against the dollar in the next week to Thursday, while Nigeria’s naira will likely weaken, traders said.



    Kenya’s shilling is seen holding steady in the week to Thursday due to slow activity before weakening due to a resurgence in dollar demand.

    At 0800 GMT, commercial banks quoted the shilling at 102.30/50 to the dollar, compared with last Thursday’s close of 102.25/45.

    “We might not see too much play at the outset, because it is the beginning of the year. But (in) my view, the shilling … is going to be under pressure. I do not see anything meaningful that will cause the shilling to strengthen tremendously,” a trader at one commercial bank said.


    Nigeria’s naira is set to witness another round of decline against the dollar in the days ahead as an increase in dollar flows from Nigerians living abroad coming home for holidays fell short of expectations, traders said.

    The local currency was quoted at 490 to the dollar on Thursday from 495 against the dollar last week on the parallel market.

    In the official interbank window, the naira was quoted at 310.25 to the dollar on Thursday, but it was expected to close at around 305.5, the same level it has traded at since August.

    “We see the naira depreciating against the dollar by the time more businesses resume operations next week after the festive season as dollar liquidity remains thin in the market,” one currency dealer said.


    The Tanzanian shilling is seen trading in a tight range in the days ahead, helped by a slowdown in demand for greenbacks due to the year-end festive season.

    Commercial banks quoted the shilling at 2,173/2,183 to the dollar on Thursday compared with 2,178/2,182 a week ago.

    “The shilling is expected to remain range-bound next week. There usually isn’t much activity at this time of the year,” said a dealer at a commercial bank in Dar es Salaam.


    Ghana’s cedi is seen flat in the coming days amid an expected slowdown in market activity as the West African nation inaugurates a new president on Jan. 7.

    It was trading at 4.24 to the dollar at 1100 GMT on Thursday, up from 4.277 a week ago. The currency has been fairly steady in recent weeks and is likely to end 2016 down 11 percent compared with an 18 percent depreciation last year.

    “We are expecting to see some dormancy as markets reorganize after the holidays while offshore investors gauge the posture of the new president after the inauguration,” a currency trader at one of Accra’s leading commercial banks said.


    The kwacha is expected to remain range-bound next week due to relatively subdued trading conditions at the beginning of the new year.

    At 1038 GMT, commercial banks quoted the currency of Africa’s No.2 copper producer at 9.8300 per dollar, from a close of 9.8000 a week ago, according to Thomson Reuters data.

    “The kwacha is likely to continue trading flat going into 2017, it seems to have found its place,” independent financial analyst Maambo Hamaundu said.


    The Ugandan shilling is seen trading with a weakening tone, hurt by appetite for dollars from commercial banks.

    At 0955 GMT, commercial banks quoted the shilling at 3,610/3,620, weaker than last Thursday’s close of 3,562/3,572.

    A trader at a leading commercial bank said inflows from sources like charities and commodity exporters would remain tight with the tempo of activity in both sectors seen remaining slow until around mid January.

    The trader said the shilling would oscillate between 3,610-3,625 against the dollar in the coming days. (Reporting by George Obulutsa, Elias Biryabarema, Chris Mfula, Fumbuka Ng’wanakilala, Kwasi Kpodo, Oludare Mayowa; Compiled by Elias Biryabarema; Editing by Mark Potter)


    Nigeria sells $1 bln to help clear backlog in biggest dollar sale since June – Reuters

    By Oludare Mayowa

    LAGOS Dec 29 (Reuters) – Nigeria’s central bank sold about $1 billion on the forward market last week to clear a backlog of dollar obligations in selected sectors, traders said on Thursday, its largest special auction since a currency peg was removed in June.


    Outstanding dollar demand was about $4 billion before June, when the 16-month-old peg was removed. Efforts to cut dollar demand have been largely unsuccessful due to low oil prices.

    Crude sales account for about 90 percent of Nigeria’s foreign exchange earnings.

    Traders said the central bank told banks to prioritise airlines, manufacturing firms, petroleum products importers and agriculture sectors, the sectors worst hit by the dollar shortage, in the auction.

    “The central bank sold $1 billion at last week’s special forex auction and directed banks to issue fresh letters of credit to reflect the amount sold in favour of the affected sectors,” a senior currency trader told Reuters.

    Traders said the central bank sold 30-day and 60-day forwards at the auction.

    On Dec. 19, the central bank instructed commercial lenders to submit their backlog of dollar demand from fuel importers, airlines, raw materials and machinery for manufacturing firms and agricultural chemicals for the special forex intervention.

    Nigeria is in its first recession for 25 years, caused by the oil price drop which has cut the supply of dollars needed to fund imports. Attacks by militants on pipelines in the Niger Delta since January have cut crude output, further reducing dollar inflows.

    The dollar shortage in the OPEC member, whose crude sales make up two thirds of government revenue, has caused many companies to halt operations and lay off workers, compounding the economic crisis.

    Some foreign airlines have closed down or reduced their operations over an inability to repatriate the proceeds of their earnings due to the dollar shortage.

    An acute shortage of jet oil in the last few months – caused by the inability of importers to secure the dollars needed to buy the fuel – has led to many operators refuelling in neighbouring countries.

    Flight cancellations by local airlines have become commonplace as a result of the shortages.

    The naira was trading at about 305.25 to the dollar on the interbank market on Thursday and was quoted at 490 a dollar on the unofficial market. (Editing by Alexis Akwagyiram and Louise Ireland)


      Dollar Pares Gains After Weak Home-Sales Data – WSJ

      The WSJ Dollar Index had hit a 14-year-high earlier in quiet trading


      The dollar pared gains on Wednesday, retreating from a 14-year-high after weak home-sales data.

      The WSJ Dollar Index, which measures the U.S. currency against 16 others, rose 0.1% to 93.48. Earlier in the day, the index hit its highest level since 2002. Trading has been thin this week due to the holidays, likely exacerbating market moves.

      The National Association of Realtors’ gauge of pending home sales dropped in November, a sign of weakening momentum for the U.S. housing market heading into 2017.

      Still, other U.S. economic data this week was strong, with reports showing rising home prices and consumer confidence.

      The dollar has surged over the past two months, supported by President-elect Donald Trump’s policy proposals and the Federal Reserve’s more hawkish interest-rate outlook.

      The National Association of Realtors’ gauge of pending home sales dropped in November, a sign of weakening momentum for the U.S. housing market.ENLARGE
      The National Association of Realtors’ gauge of pending home sales dropped in November, a sign of weakening momentum for the U.S. housing market. PHOTO: CHARLIE NEIBERGALL/ASSOCIATED PRESS

      Sireen Harajli, an analyst at Mizuho Bank, expects the dollar rally to slow in the first quarter of 2017 as the U.S. legislative process begins to take shape.

      “The recent gains in yields and the U.S. dollar are largely based on expectation and are subject to the risk of a correction” if Mr. Trump’s administration fails to deliver its policy proposals, said Ms. Harajli in a research note.

      Meanwhile, the euro slid 0.5% against the dollar to $1.0408. The European Central Bank this week warned that Italian lender Monte dei Paschi di Siena has a far bigger hole in its balance sheet than previously calculated.

      Write to Chelsey Dulaney at Chelsey.Dulaney@wsj.com

      The top 5 decisions that shaped Nigeria’s economy in 2016 – Businessday



      The year 2016 will go down in history in three days as the period when recession hit the country, pushing many Nigerians down the poverty ladder. Several economic decisions taken or not taken by government had a direct impact on the lives of Nigerians within the period.

      Delay in the passage of the  2016 budget

      The 2016 budget was not signed into law until May 2 leading to a significant slowdown in business activities for most of the first half of 2016, at a time the economy was already showing signs that it was heading into a recession.
      “Nigeria virtually shot itself in the foot,” said Rafiq Raji, an economist and managing director of Macroafricaintel, an Africa-focused macro-investment consultancy firm.
      “This year’s budget was not passed until the second quarter of the year. With government as the dominant player in the economy, almost everything ground to a halt as a result of the delay,” Raji added.
      The delay in implementing the expansionary N6.06 trillion 2016 budget, fashioned to boost economic growth, compounded the economic lull in the country.

      Electricity tariff hike

      A plan to increase electricity tariff that has been on the drawing board even before President Buhari was sworn-in, came into effect in February, with electricity tariffs going up by an average of 45% across board. This had a significant impact on Nigerian households and businesses, especially since the increase did not lead to any significant increase in power supply across the country. In effect, households and businesses found themselves paying higher electricity bills, while still generating most of the power they use.  A Federal High Court in Lagos eventually quashed the tariff hike in July, but the National Electricity Regulation Commission (NERC) has appealed the ruling. Economists note that the increase in electricity tariff largely fed into the fast pace rise in prices of goods and services in the country.

      Fuel price hike

      President Buhari was forced to take one of its most difficult policy decisions on May 16, when the government adjusted fuel prices to conserve scarce dollars in the face of a decline in oil revenue- the largest source of foreign exchange earnings and government financing.
      The Minister of State for Petroleum Resources, Ibe Kachikwu, said that the Federal Government would have had to cough up N16.4 billion every month to offset the subsidy claims of oil marketers had it not taken the decision.
      The price adjustment saw the retail price of fuel jump 68 percent to N145 per litre from N86.50.

      “At root, the difficulty for Nigeria is that it exports too little oil per person, to offer a significant fuel subsidy,” according to Charles Robertson, chief economist at investment firm, Renaissance Capital.
      “Gulf countries export 25 times more oil per person and even they have removed the fuel subsidy,” Robertson added.
      But oil industry players have criticised the decision to hike fuel prices instead of removing subsidy, as fuel price hikes are always not enough incentive to drive investment into the downstream sector.

      Naira devaluation

      Faced with a sharp drop in crude oil revenues, the exit of foreign investors and the dry up of new dollar inflows into the country, which led to declining external reserves, Nigeria’s Central Bank was soon faced with a decision to draw down remaining reserves to defend the exchange rate, impose capital controls or accept a weaker exchange rate with the possibility of losing control of inflation.

      So on May 16  Godwin Emefiele, the Central Bank Governor, announced a policy shift from a hard peg to a currency float, effective June 20.
      June 20’s naira float saw the naira shed over 62 percent of its value, exchanging for N320 per US dollar from N197 pre-devaluation.
      In a clear signal that June 20’s big devaluation proved decisive in attracting foreign capital, the capital imported in June rose markedly and made up for record low inflows in April and May, to boost total capital importation in the second quarter of 2016 to $1.04 billion.
      The level of capital imported in June was $610.77 million, double the amount recorded in the months of April ($305 million) and May ($125 million).
      In its most recent report, the NBS noted that total value of dollar inflow into Nigeria in the third quarter (July to September 2016) rose to a year high of $1.8 billion, an increase of 74.84 percent, compared to the second quarter, but a 33.7 percent decline compared to the same period of 2015.
      Tajudeen Ibrahim, head of research at Chapel Hill Denham said the decision to float the naira was good but the results are yet to be seen, due to the lack of transparency in the foreign exchange market.
      “We were unable to keep our nerves to allow the naira float complete its cycle,” Ibrahim said. “Until there is a proper price formation, the positive results from the float will never come.”

      Interest rate hike

      Nigeria increased interest rates by 300 basis points in 2016.
      The Central Bank first raised rates in March by 100 basis points to 12 percent from 11 percent, before it raised rates again in July by 200 basis points to 14 percent from 12 percent.
      Across sub-Saharan Africa’s top ten economies, Nigeria was second only to Angola, as the country with the biggest hike in interest rates in 2016.
      Angola raised its rates by 500 basis points, while South Africa in third place- increased rates by 25 basis points.
      CBN governor, Emefiele said rates were raised so as to curb rising inflation and offer investors positive yields, all in a bid to attract dollar inflow into the severely battered economy.
      Slowing month-on-month inflation on the back of monetary tightening can give the CBN some belief in its stance; and while foreign inflows have outpaced outflows since July, the rate hike has been somewhat rewarding. Though the CBN’s decision to hike interest rates has been controversial. Kemi Adeosun, minister of finance, had preferred that the CBN lower interest rates to drive economic growth.

      Razia Khan, chief economist at Standard Chartered Bank, however thinks lower interest rates will do nothing for growth, as the country needs dollars and confidence in the naira.

      “Amid weak growth and a foreign exchange constrained environment, banks will be cautious about lending. Lower interest rates will achieve little,” Khan said. “The CBN had no choice but to tighten, in order to safeguard foreign exchange stability and send a clear and consistent message on policy direction to boost investor confidence.”

      The year 2016 is closing with inflation at an 11 year high of 18.5%, rising unemployment at 13.8% and the economy expected to contract by a minimum of 1.7%. This makes it easy to conclude that the major policy decisions made in the year have not delivered the expected positive outcomes in terms of reviving economic growth.

      Getting Nigeria out of recession – The Guardian

      By Bayo Ogunmupe

      With the decline in the price of oil and the subsequent decline in revenues accruable to the Federal Government, there have been strident calls for the Nigerian economy to be diversified. And both President Muhammadu Buhari and Vice President Yemi Osinbajo have agreed to take urgent steps to diversify the Nigerian economy. But these are mistaken views, because our economy is well diversified.

      According to the World Bank, in 2014, after the rebasing of the Nigerian economy, it was discovered that the economy was more diversified than previously documented. Although we can diversify further, diversification isn’t our priority. Our problem lies in oil and gas which accounted for 11 percent of our Gross Domestic Product (GDP); and this oil accounts for 90 percent of our foreign exchange income. Moreover, oil accounts for 80 percent of our yearly revenue.
      This means we have for too long relied too much on revenues from oil. We have neglected other sources of revenue. However, now that oil revenue has plunged to its lowest ever, Nigeria must of necessity sink deeper into recession. Let us, therefore, seek ways to pull Nigeria out of recession. One of our faults is pride or ignorance; a refusal to change in the face of imminent danger. We also hate to imitate good policies elsewhere. We are a federation but our leaders chose to run Nigeria as a unitary state which makes governance very expensive.
      To bail Nigeria out of recession, we must look for how they extricated themselves from recession elsewhere and imitate them. It is as simple as that. To foolishly persist in wrongdoing is to continue to wallow in poverty. For the second time in eight years, Greece came out of recession recently. With a bail out from the International Monetary Fund, Greece had to fulfill some harsh austerity measures. These measures included a cut in the salaries of public office holders, workers including civil servants and pensioners. That led to street protests and strikes by workers. These austerity measures led to the privatisation of airports, highways and government housing estates.
      Apart from the reduction of the staff strength, austerity also led to higher taxes and cuts in allowances. Subsequently, Greece got out of recession. Before we offer solutions rather than palliatives, let us examine our confused monetary policies. In the third quarter of 2014, the Central Bank monetary policy committee increased interest rate to 13 percent and stayed there till November 2015. Thereafter it was cut to 11 per cent. In March 2016, this rate was raised to 12 per cent and then in July, it was raised again to 14 per cent.
      However, between May 2015 and November 2016, inflation doubled from eight per cent to 17.7 per cent. This inconsistency in policy should stop. Since we have opted for a fixed exchange rate, we either have monetary autonomy or capital mobility. Thus, the first step is to float the naira continuously. Then we can negotiate foreign loans as standby facility in the event of a crash. That $30 billion Federal Government planned to borrow might have this policy somersault in my mind.
      Under these circumstances, the naira will depreciate as it had been doing. Going for loans elicits a range of policy options in a developing economy like Nigeria. We have to abide by the terms of our lenders. Continuing our current policy will result in high inflation, low investment and high unemployment. These short term pains are inevitable. We must pay the price in hunger for not saving for the rainy day. Such a new policy option will be followed by higher investment and a sustained period of low inflation with higher growth.
      However, to boost employment, we need the enthronement of a National Full Employment Plan with special funds to prosecute it. To make it a proper palliative, NAFEP loans should be collateral free, interest-free and used mainly for import substitution enterprises. In these dire circumstances, the Buhari administration must push forth aggressive initiatives. Recently, the African Development Bank approved $56 billion to scale up industrial development in Nigeria. In the medium term, industrialisation must be the catalyst of the job creation category of the Nigerian development effort. The government must support this effort with a favourable business environment, access to the capital market and competitive entrepreneurship.   

      In effect, Nigeria must ensure further cooperation with China. Cooperation with China provides the potential for substantial project financing at low interest rates. The efforts to accelerate the development of our infrastructure through Buhari’s state visit to China last April are commendable. A key project is the modernization of the Nigerian Railways. This has the potential of unifying fragmented markets and boosting national cohesion.
      Moreover, efforts to rehabilitate Boko Haram-ravaged North East and the proposed Export Processing Zones will attract Chinese investors bent on displacing Anglo-American dominance in Nigeria. In 2017, Buhari must protect fiscal sustainability at all costs, even as this might exacerbate external imbalances. Most importantly, Nigeria must execute structural reforms for sustained and inclusive growth.
      For clarity, for our leaders are hard of hearing, structural reforms mean the merging of states to reduce expenditure, reduction of staff strength of the civil services of the states and that of the civil service of the Federal Government. The National Youth Service Corps (NYSC) should be scrapped. It serves no useful purpose in a depression. We can no longer finance it. The refineries should be sold to leave the Nigerian government with a maximum equity of 30 per cent. Ever heard of a government-owned refinery in the United States? As the global economy continues to deteriorate, the time to accelerate policy responses is now.