Federal Government actively gambling our future on the price of oil

The recent announcement by the Federal Government, in the guise of Kemi “the village bean counter” Adeosun (Minister of Finance) to cease using Naira denominated treasury bonds and instead source dollar denominated debt is national suicide.

The short term impacts of this move may well be positive – Reducing the interest payable by the FG on funds raised, freeing up Naira into the real economy for other lending etc.

However, the real issue is that all debt will be payable in USD or other foreign currency.

This is a very risky, if not suicidal gamble.

By raising funds that are repayable both in principal and interest in dollars, means that the Federal Government needs to generate sufficient Naira to pay.

Now, we all know that the Naira is completely dependent for its value on the oil price and that there has been no economic diversification.

If the oil price decreases – which all analysts expect if to over the medium and long term, then Nigeria will have to pay more and more Naira to service the dollar value of the debt.

Even with a small fall in the oil price, this will be crippling.

We do not have to look far for recent examples of how bad this policy is and how disastrous for the economy. Just look to Venezuela currently.

This policy is being lauded in some quarters as sensible.

We at Naira Insider consider it extremely dangerous and could well bring  bankruptcy and associated civil turmoil within the next 5 to 8 years.


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