«Home

Do We Need to Maintain Huge External Reserves?

Nigeria external reserves (savings) is said to have reached about $25 billion (http://allafrica.com/stories/200508230086.html). However, people are suffering, no jobs while cost of living is increasing daily due to inflations.

1. Do we need to maintain this huge external reserves?

2. Why can't the government be innovatiove to spend this people on productive sector of economy to drive employment?

3. Is it needed for OBJ to save so much money for Nigeria? Remember, he left so much money back in 1979 only to be squandered by Shagari. Why not use the money to better the lot of Nigerians now.

    3.1: The schools are dillapidated

    3.2: The health system is dillapidated

    3.3: The transport sector is dillapidated

    3.4: Youth unemployment is about 60%+.

    3.5: Mortality rate is reduced to 49 years

    3.6: Poverty rate is about 70%+

   

With all these problems that require goverment to actively spend money on above sectors, why save the money for looters who will squander it again? Much like IBB squandered the windfall from the 1990 Gulf war?

Anybody out there reading this? OBJ? Okonjo-Iweala? - Why do we have to save so much when we are hardly feeding ourselves or fullfilling the basic needs of humianity?

Avatar
Newbie
8 answers

Foreign reserves are not SAVINGS. They do not BELONG to the Government. Nigeria produces next to nothing and needs forex to pay for our huge appetite for imported goods.

Think OBJECT >Mirror> Image.

The Foreign reserve is the Object and All the Naira in circulation in the image. Without Reserves the Naira is Just a piece of paper.

Actually the naira is a certificate of Federal government Debt and the reserves are what gives that certificate value

So you can see the Reserves do not belong to goverment but to everyone who has Naira. If the foreign reserves disappeared today You might be buying a Coke for 20 Million naira just like Zimbabwe a few years ago

0
Avatar
Newbie

External Reserve that is held outside of the country ? can you explain why this money is not held in a nigerian bank

0
Avatar
Newbie

We will need the reserves when oil prices come down.We made this mistake in the 70s ,during the last oil boom ,of spending our money without puting some away for the future

People talk about spending the money,don't they realise that expenditure has gone up 3 fold since the Abacha days.Where has the money spent already gone?We can't start spending even more when the Govt can't account for all that the increase in spending.For instance,where is the money spent on N.E.PA?

0
Avatar
Newbie

I agree that the external reserves need to be brought into the country and i think there are plans for tha in 06. With it being banked outside, the bankers holding it are making money while nigerian banks lose out. perhaps after the consolidation the nigerian banks will be strong enough to hold the reserves. I trust soludo and think he's pretty smart

He has used the reserves to maintain stability with the naira, but the reserves wont save the naira if the economy is still shaky and dependent on only oil. We need to create mor eproducts that are wanted on a world stage

0
Avatar
Newbie

I hate all this money talk...

We need the reserves and we need to boost them. The problem remains that there are no checks and balances that work in this country, so we are not guaranteed that the reserves will remain in place at the end of the Obasanjo administration.

0
Avatar
Newbie

Frankly that reserve isnt that huge, especially for an oil producing state. In times liek these oil producing states increase thier stockpiles a lot because the price of oil goes up so high. in 7 years russia went from 12 billion to 120 billion, and added another 30 billion this year. Oil countries raise the money quickly, like algeria and the rest.

I think the reserve is one of the positives about our economy and sometimes nigerians have a tendency to over complain. if the reserves were lower, we'd shout, why cant be increase it?! Now its high, people are looking at it like it should be raided for feed other areas. Thats not the purpose of a reserve. One of the ways singapore was able to do well was to have veyr high savings rate, and not use that money for developmental purposes. They are very sensitive about thier reserves

The fact remains there's plenty of money from excess crude oil sales to fund good roads, schools, etc but those in charge of that money are squandering it. That causes people to look at a ministry that is actually doing well and asking, why don't we take thier money. It shouldnt work that way. The excess crude that the feds make (outside of the amount that goes to the reseves) if used well wouldnt bring attention to the reserves

0
Avatar
Newbie

Obong, you are right, we need to plan. However, when you save, you dont starve yourself to death. The concern is the HUGE external reserve. A sizable percentage should be directed to basic needs like education, health, transportation etc as Ive said. Privatization isnt going to fix those. They are the basic necessities of a society for which our government is failing. Have you seen Schools, hospitals and roads in Nigeria lately? More than 70% of graduates ends up unemployed after school, hence 419, scramble abroad, etc.

This HUGE reserve is nothing but evidence of lack of leadership foresight.

Again I repeat, goverment should selectively spend on basic infrastructures (when basic infrastructure is right, foreign investment in economy is improved). They should not stave off such huge money for the next Shagari or Babangida to blow away.

0
Avatar
Newbie

You can't plan that way. To spend the money now because we are certain looters will come and take it?! i mean if thats the situation then let's dissolve nigeria because we have no hope. Its best to plan with the assumption that measures will be taken to ensure people don't steal the reserves in the future. The reserves are need because we are an import heavy country, and it creates stability and confidence in the economy. Have you seen china and japan's reserves? Even algeria has more reserves than Nigeria, almost double. Its a prudent thing to keep us from ending up like Niger.

Besides, spending by the feds is not what we need exactly. Its privitisation of key sectors and policies that make it more attractive for foreign investment to come in.

0
Avatar
Newbie
Your answer
Add image

By posting your answer, you agree to the privacy policy and terms of service.