Nigeria is facing 4 major headwinds and we have to prepare for it. This is not like 2008/2010, or 2015/2016 crisis.

Thread https://twitter.com/Dolarpo/status/1252990560257945600

1) Low oil price - an over 50% decline since January
2) Lower royalties from PSCs due to prices falling below $20 for most of our crude grades (long story, we signed this in November, so the price-based portion of royalties means we earn nothing, just the flat rate of 10%)

3) By May, we will also cut 350k from our production in line with OPEC cuts, further reducing our revenue, which is being battered by the dip in prices, dip in royalties and now output.
4) Lastly, the overhang of unsold cargoes means we can't even get the revenue on time...

We are in a period of what we call 'Demand Destruction'. Except we clear out the crude oil in storage on vessels at least and cut production by well over 25 million barrels, any recovery in prices is going to be short-lived. So what are the options for a country so dependent...

on oil?

1) We have to consider buying crude oil from our local producers into storage in local currency (LCY). This will be strategic government reserves, that can be resold when crude prices are higher. The USA does this *smiles* since LCY is the USD anyway. Other countries...

Russia, China, India also do this. The strategy here is a price floor where the government steps in to sustain a level of production. The idea is to sustain the vital segment of the economy. You have to ready to sell to the govt in Naira and at a defined price.

2) We also need to adjust the exchange rate so that every dollar means more. The best bet would be to allow the market to continue to dictate where the price should be and allow other prices that depend on FX also adjust accordingly. If you start printing naira, without this...

you will not only create an unmitigated demand for dollars, but you'll also create the kind of situation that threatens the kind of investments you want to attract. So best to tweak exchange rates before you consider this.

3) I hate to agree with Tinubu on this but yes we will need to consider printing naira to avoid selling valuables at dirt cheap prices or going further into too much debt. We will have to borrow from IMF no doubt - can't waste a good crisis to drive reforms, which IMF will want