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Oil drop leads to Naira falls in Nigeria

Thursday, November 13, 2014 - 02:01

Nigeria's currency has come under pressure in the past two months from falling global oil prices, dampening appetite for assets in Africa's biggest economy and chief oil exporter. Joel Flynn reports.

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For Nigeria's 180 million people, 2015 is a big year. The country is gearing up for one of the closest and costliest presidential elections since the end of military rule. At the same time it's struggling with a wage crisis, an Islamic insurgency in the north and falling oil prices. That's causing currency devaluation and budget shortfalls says financial analyst Bismarck Rewane. SOUNDBITE: Financial Analyst, Bismarck Rewane, saying (English): "Oil has dropped by as much as 30 percent and therefore when we earn less, we have less to spend and what we have to spend are the dollars we've earned so the naira has actually reduced in value compared to the dollars that we have available." Nigeria is Africa's top oil producer. While it only relies on oil for 14 percent of GDP, crude still makes up almost all of foreign exchange, and 80 percent of government revenue. As the Brent price has dropped, so too has the naira, Nigeria's currency. Recent weeks have seen it in freefall, prompting foreign exchange reserve sales from the central bank and lowering limits on foreign currency borrowing. More bad news for already squeezed government finances, and for Nigerians struggling with the cost of living. SOUNDBITE: Financial Analyst, Bismarck Rewane, saying (English): "If they are becoming better, if tomorrow is better than today and today is better that yesterday, you are a developing economy but if today is worse than yesterday and tomorrow is worse than today, then you are an underdeveloped economy. So what we want is a developing economy which is fast growing." The election will take place in February. And much of the debate so far is about the fight against Boko Haram. The Islamist militant group was behind the kidnap of hundreds of schoolgirls earlier this year. Nigeria's President Goodluck Jonathan has vowed to defeat the five-year-old insurgency. How he fights for the economy though could be just as big a battle.