In May 2015, the new President of Nigeria; Muhammadu Buhari was elected. He described Nigeria’s economy as being “in a precarious state,” due to external factors: mainly falling oil prices that intensified internal problems and poor management that enabled or encouraged mass theft of state revenues. During his speech at his inauguration, President Buhari said:
careful management will be needed to bring the Nigerian economy out of the deep trouble it is in.
He also pledged to take action to tackle the Boko Haram insurgents who have terrorized the people of the impoverished North-Eastern region and neighbouring nations. Stocks surged and investors had high expectations and believed that the former military dictator would be more effective at managing the economy than his predecessor was, but less than a year later that outlook has changed drastically.
For the first time in twelve years, the fall in prices badly affected Nigeria as oil earnings account for majority of its income. Oil prices fell below $30 a barrel and Nigerian stocks fell to a three year low in reaction to the continued fall of oil prices. Investors have been dumping stocks in fear of the absence of a plan to manage the situation thereby resulting in a plunge in all share index of the country.
The fall in oil prices also led to a fall in the country’s foreign reserves, pushing the central bank to establish unusual monetary policies and impose strict restrictions which had little effect on the back sliding of the Naira. The official exchange rate of the Naira to the Dollar has fallen over 25% in two years and it is now 200 Naira to 1 Dollar. But the more realistic value is seen on the parallel market in recent days where the naira’s value has fallen to 300 naira or more to exchange for a dollar.