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EDITORIAL:Beyond Huge Foreign Reserves

Posted by Daily Champion (Lagos) on 2005/07/06 | Views: 193 |

EDITORIAL:Beyond Huge Foreign Reserves

NIGERIA'S foreign reserves lately hit an all-time high of 21.8 billion dollars with prospects of soaring to 25 billion dollars going by a recent statement by the Central Bank of Nigeria.

NIGERIA'S foreign reserves lately hit an all-time high of 21.8 billion dollars with prospects of soaring to 25 billion dollars going by a recent statement by the Central Bank of Nigeria.

The steady increase, from 17 billion dollars in December 2004 to 19.59 in January, 20.55 in February and 21.8 in March, is consequent upon an increase in crude oil production and government's decision to hold back some of the accruing funds as foreign reserves. The boosting of oil production from 64.96 million barrels in February to 71.92 in March, for instance, and the attendant rise in revenue also contributed to this relatively phenomenal rise in foreign reserves.

Nigeria's accumulated reserves have become so substantial that the country is said to be in a good standing to finance 20 months of imports. The reserves are also said to have stabilized local exchange rates. Commendable as this development seems, given its epochal record and the apparent chest-beating of this regime on that score, the bloated reserves have also come under hammer by well meaning stakeholders in the economy.

With equally phenomenal parlous infrastructure especially in the power sector, mounting unemployment and evident inflationary trends, in spite of claims that it has been reined in, stakeholders have faulted the strategic reserves build-up. They insist, and rightly so, that the bloated figures are at variance with realities on the ground.

The trumpeted paucity of funding for development of local facilities, bound to impact positively in lifting the quality of life of Nigerians, clearly accentuates the vanity of burgeoning external reserves. This is even more so given that such stakeholders as the Nigeria Economic Summit Group (NESG) and Manufacturers Association of Nigeria (MAN) have held that the country hardly needs such huge foreign reserves in the face of stifling conditions which debilitate internal production capacity.

In fact, the NESG insists that a country on the throes of economic recovery like Nigeria does not need more external reserves than is suitable for six months import finance. The group, and several others, have advocated a systematic injection of the funds into the real sector and infrastructural development in a manner that would not distort the economy.

The country still wallows in darkness, as it were, since the National Electric Power Authority (NEPA), which has now been scrapped, virtually became an intractable problem for this administration; bad roads still abound even as complaints from health and educational sectors show that they require attention.

Careful injection of funds into these areas and the real sector via the Bank of Industry will serve better and more practical purposes than the ego boosting accumulation of foreign reserves which has no direct bearing on the average Nigerian. We hold nothing against saving for the rainy day but it should not be done at the excruciating expense of improving the lives of citizens which remains the primary reason for the existence of government and the prime essence of governance.

If the average price of Nigeria's crude, Bonny Light, increases, as it did by 7.04 per cent in the first quarter of 2005 compared with the corresponding period in 2004, such fortunes should reflect in the quality of lives of the people. Accumulation of reserves in the face of impending mass retrenchment of civil servants and high unemployment level is no way to give human face to economic reforms. There ought to be a systematic and deliberate balancing act between saving for the future and improving current quality of lives of citizens.

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