Valentine Okafor
The Federal Government is considering ways to curb soaring inflation, and would be giving the Central Bank of Nigeria (CBN) powers to use gold to boost reserves.
Already the National Assembly is discussing a Bill to create a Gold Reserve Authority and give the CBN the powers to be the automatic off-taker for all the gold produced in Nigeria.
Lawmakers are also proposing boosting the share of gold of Nigeria’s foreign reserves to a minimum of 30 per cent, compared to 4 per cent at present.
Nigeria is heavily reliant on oil and gas for its budget revenues.
So far, it has failed to boost significantly oil output to get more revenue, or to diversify its economy to make it less dependent on oil production, exports, and prices.
Inflation in the country has been running high over the last year, since the CBN dropped the peg of the local currency to the U.S. dollar.
The Nigerian currency, the naira, has lost 70 per cent of its value against the dollar over the past year.
Nigeria’s inflation hit a new 28-year high in May, and was at an annual rate of 33.95 per cent with food and non-alcoholic beverages which make a large part of the inflation basket the biggest contributors to inflation, as in previous months.
The IMF said in May that near-term risks in Nigeria are tilted to the downside.
“Adverse shocks to oil production or prices would hit growth, the fiscal and external position, and exacerbate inflationary and exchange rate pressures,” the IMF said.
Meanwhile, the Nigerian National Petroleum Company Limited (NNPCL) has declared a state of emergency on production in Nigeria’s oil and gas industry as the country struggles to boost output.
The NNPCL believes that Nigeria needs to take urgent action to address the challenges that have plagued the oil and gas industry for years, NNPC Group Chief Executive Officer, Mele Kyari, said at an industry event last week.