1. Sell oil, earn US dollars
2. Central Bank of Nigeria CBN changes Dollars to Naira at N305 to $1
3. CBN credits Federal Government of Nigeria FGN and State Government Consolidated Revenue Fund (CRF) accounts at N305 per $1
4. FGN and States Governments pay salaries at “N305”
5. Households earn at “N305”, go to shops to spend.
6. Shops seek to buy goods from Manufacturers and Importers with “N305” sales income from Households
7. Manufacturers and Importers buy USD at “N495” from parallel market to import 44 items excluded from Inter-bank market by CBN
8. Manufacturers and Shops sell products at a price of “N495” plus profit.
9. Households can’t buy..Shops can’t sell.
10. Households implement austerity measures, stop spending, reduce consumption.
11. As household purchases and consumption falls, Manufacturers cuts costs, raise prices, sack workers, many close down, output falls, economy goes negative, ie a recession
12. As workers are sacked, Household incomes fall, Federal and State revenues from Companies Income Tax. Customs, PAYE falls….in effect, non oil economy falls.
13. As non-oil incomes falls, CBN relies on Oil revenues (N305) for Foreign Exchange…..
14. As CBN relies more on oil based forex earnings, manufacturers, business and importers can’t get inter-bank dollars for “approved” transactions. International business eg airlines pull out.
15. As difficulties in funding dollar requests rise, Federal Government has to borrow $29.9b to cover trade and current account deficits.
16. The economy is now in recession, inflated, unemployment is high, GDP growth down as business fall, economy has 4 Exchange rates…
if you are the head of the Economic Team of Mr President, where from Items 1-15 will you address to break the cycle of recession..
Harmonise ev hange rate regime – One exch rate.
Borrow $10 over 3 years and push into infra renewal – roads, schools , healthcare.
Support States to pay down salary arrears.