Debt crisis

• 82% of Nigeria’s export earnings come from oil.

• In 1981 the price of oil collapsed: export earnings fell from

$26 billion to $10 billion in 5 years

• The country’s foreign debt rose to $19 billion

Government measures

To reduce import the government:

1. introduced import licences for all products.

2. introduced an import surcharge of 30%.

3. increased import duties.

4. reduced the foreign exchange available for imports.

5. allowed the value of the naira to fall.

Consequences

• The balance of payments improved but the economy stagnated.

• The government had to introduce new measures to stimulate the economy, especially exports.

Current position

• Exporters can keep 25% of their foreign currency earnings.

• Business people can open external bank accounts – foreign currency accounts in Nigeria.

• Providing they have an import licence, importers can bid for foreign exchange. The exchange available goes to the highest bidder.

Θ Now listen to recorded extracts from the review and answer the questions.

1. What is Star-Line’s business?

2. What is their main supplier?

3. What is the country’s economic situation?

4. What does the government do to stimulate the economy?

5. How does the country get foreign currency?

Can you talk about the economy of your country? Listen to the recorded statement about Nigeria, and then prepare a short statement about your country’s economy.

Θ Star-Line has the jewellery concession in the duty-free areas in Lagos and Kano airports. About 70% of the goods bought in these shops are paid for in foreign currency. Government regulations allow the company to keep 25% of this foreign exchange. In the past, Star-Line has earned enough foreign currency in this way to pay its foreign suppliers. But one day Johnson Odusanya, Star-Line’s Managing Director, receives the letter from his main supplier.

Read the letter.

Essil d’Or 5 rue de la Paix 75001 Paris Tel (+331) 47208898 Telex 26172 Essil Fax (+331) 47204128 Mr. Johnson Odusanya Managing Director 19 December 19 .. Star-Line Jewellers Nigeria Ltd 17 Famolo Shopping Centre Ikoyi Island Lagos, Nigeria Dear Mr. Odusanya, We do not appear to have received payment of our invoice, dated 7 Nov. 19.., for F475192. This invoice is now overdue. The agreed credit facilities require payment within 30days of date of invoice. We would be pleased, therefore, to receive your payment by return. Alternatively, please notify us of any problems you may have with this invoice. If you have already paid this account, please ignore this letter and accept our apologies. Yours truly, Christine Calvet, Export Sales Manager

Answer the questions:

1. How does Star-Line earn foreign currency?

2. What problems are government restrictions creating for Star-Line?

3. What are terms of payment offered by Essil d’Or?

Θ Madame Calvet’s letter to Johnson Odusanya is polite but firm. Listen to the recording where two stronger versions of the letter are dictated. Write them down.

Θ In order to attract customers who are not travelling by air, Star-Line recently opened a shop in the exclusive Falomo Shopping Centre in Lagos. The new shop is doing well, but there are problems – as Johnson Odusanya explains in a letter to Christine Calvet.

Read the letter.

Star-Line Star-Line Jewellers Nigeria Ltd 17 Falomo Shopping Centre Ikoyi Island, Lagos, Nigeria Mme Christine Calvet Essil d’Or 5 rue de la Paix 28.12.19.. 75001 Paris France Dear Mme Christine Calvet I regret that we were unable to settle our November account. As you know, we recently opened a new outlet in the Falomo Shopping Centre in Lagos. As a result, our sales of Essil’s products have increased significantly. We are confident this trend will continue. However, at present, we are having some difficulty making payments abroad. This is because there are government restrictions on the purchase of foreign exchange. In the past, we have earned enough foreign currency in our duty-free shops to settle our foreign accounts out of our foreign currency earnings. But our imports have increased since the new shop opened, and we are now having to apply to the Central Bank of Nigeria for some of the foreign exchange we need. As soon as we receive the necessary currency, we will clear the account. In the meantime, we are arranging a telegraphic transfer of F368249 in part payment. As our record of payment has always been good, we ask you to agree to this delay, and to continue to supply our orders. We thank you in advance for your understanding. Yours faithfully Managing Director Johnson Odusanya (Mr)

When his secretary has typed the letter, Johnson Odusanya reads it through. He marks some errors in style. Correct the errors.

Answer the questions:

1. What does the company do to earn more foreign currency?

2. What does Mr. Odusanya suggest in order to settle their payment problems?