The meddlesome World Bank says, “By August 2024, the Ethiopian birr, Nigerian naira and Sundanese pound will be among the worst (performing currencies) in the (African) region,” adding, “The naira will lose value.” As of the end of August, the year-to-date decline rate was approximately 43%.
Banker Chika Mbonu’s perception that the naira has become cheaper than many African countries’ currencies is offset by a contrary World Bank report that found the Kenyan shilling had appreciated by more than 21 percent over the same period.
Bloomberg ranks the naira as one of the world’s 10 weakest currencies, and three of them – Zambia’s kwacha, Angola’s Kwanza and Nigeria’s naira – are African. Their weaknesses stem from volatile commodity prices, inflationary pressures, and lack of dollar liquidity, and from these perspectives Western metropolitan economies can prey on Third World economies. .
But if President Bola Tinubu’s economic managers can turn things around and capitalize on the economy of large-scale production, especially by getting the real sector to produce goods that Nigeria produces for export, the weak naira will be a disadvantage. There’s no need to be. Comparative advantage. Investment banker Dr. Nnaemeka Obiaeli says Nigeria does not have a currency problem but lacks productivity.
After the Naira gains strength from the accumulated foreign exchange reserves, it gains more convertible currency to finance imports and ultimately acquires more infrastructure and industrial production capacity that strengthens the Naira. The value of the naira should be further devalued to maintain the weak regime that needs it. .
However, strengthening the naira is not the only objective of this strategy, as it is to reverse the current import-oriented trend of the Nigerian economy and develop ready markets for Nigerian manufacturing in wealthier economies. .
Nigeria’s fiscal, monetary and macroeconomic policymakers should consider this unique opportunity to strengthen the Nigerian economy, which is suffering from inadequate economic policies imposed by the Bretton Woods system on an unprepared political class.
You don’t need to be an economist to know that consumers in other countries prefer to buy cheaper goods in countries whose currencies are relatively cheaper than their own. The world’s two largest economies, the United States and China, are masters of this highly profitable game.
One obvious “low hanging fruit” place to start leveraging the tanking naira is to encourage the export of petroleum products from refineries such as Dangote and the Nigerian National Oil Company to countries with stronger currencies than the naira. is. .
Although subsidies have been abolished, smuggling of Nigerian gasoline and other petroleum products remains relatively profitable in West and Central African countries due to the weak naira. Nigeria should take advantage of this ready market and redeem the N132 trillion in revenue that the World Bank claims Nigeria has lost in subsidies.
Mr. Wale Edun, Minister of Finance and Coordinating Minister for Economic Affairs, attended the Group of 20 (G20) Economic Conference hosted by the World Bank and International Monetary Fund in Washington, DC, along with Central Bank of Nigeria Governor Yemi Cardoso. said. The simple proposition is that all Nigeria needs to do to strengthen its currency is increase oil production.
That is true, but it is not enough for an economy capable of adding value to primary products. This only fuels the concerns of foreign investors who are interested in how to easily repatriate their profits back home. This is why the CBN’s Deputy Governor for Economic Policy, Muhammad Sani Abdullahi, cheekily revealed that “Nigeria currently has foreign exchange reserves of $40.2 billion.”
Mr. Abdullahi said the increase in foreign exchange reserves is “a significant step compared to a year ago, when (Nigeria’s holdings) were less than $34 billion, with at least 14.3 months for imports of goods and services and 15 billion for goods alone. “It can cover months,” he boasts. It ignores the productive capacity of the Nigerian economy.
Abdullahi should have answered questions from Arise News TV’s Lotus Odili.
If there is a government plan to bring Nigeria Inc back to work. The real sector is the key to strengthening any country’s currency.
Invisible Minister of Petroleum Resources (Gas) Ekperikpe Ekpo should expand production of liquefied petroleum gas used for cooking rather than halting exports. His counterpart at the Ministry of Petroleum Resources, Heineken Lokpovili, plans to increase daily oil production by 1 million for export.
Nigeria’s federal and state governments can jointly encourage the private sector to invest in the country’s agriculture and agribusiness sectors to grow more crops and turn them into industrial products for export.
For example, if southern Nigeria could turn its agricultural crops into industrial raw materials for the pharmaceutical and textile industries, and northern Nigeria could revive its export leather trade, Nigeria could turn around its dismal exchange table.
Governor Lucky Ayedatiwa of Ondo State has already promised to promote agriculture and food security if re-elected in the off-season gubernatorial election in November 2024. He could motivate voters to supply cheaper food crops to Americans who are currently concerned about high food prices.
As was the case in the 1960s and 1970s, the federal and state governments should invest in significant improvements to tertiary education institutions to attract foreign students and their convertible currencies to the Nigerian economy.
An accompanying move would be to reverse medical tourism by Nigerians to other countries and improve medical infrastructure to attract patients from countries that have traditionally provided medical care to Nigeria’s cash-strapped elite.
Sule Abdulaziz, the transmission company’s chief executive, said: “(Nigeria) supplies Togo, we supply Benin (Republic) and Niger (Republic)…They receive electricity from Nigeria 24 hours a day. They are supplying it and they are paying the fee.” This is enough incentive for Nigeria to expand its power sector capacity to further expand its supply to the West and Central African markets.
The Federal Government, State Governments and Local Governments will allocate funds from the Crude Oil Excess Account, or from the savings generated by the removal of petrol subsidy, to electricity, which is perhaps the most fundamental infrastructure for the success of Nigeria’s industrialization strategy. You may agree to divert the funds to investments in
(Incidentally, power minister Adebayo Adelabu’s argument that increased funds from charging premiums to the power sector’s Band A market will lead to equipment upgrades and expansions does not seem to hold water.)
The incoming Minister of Industry, Trade and Investment, Dr. Jumoke Oduwole, will work with the Minister of Budget and Economic Planning, Abubakar Atiku Bagudu, and Mr. Edun to urgently create an enabling environment to revive the comatose real sector of the economy. You should start thinking about how to create it. Nigerian economy.
If all this goes well, what CBN Governor Cardoso will need to do is come up with creative ways to further devalue the Naira to make Nigerian agricultural and industrial products more affordable to consumers in foreign countries where currencies are appreciating. All you have to do is keep exploring.
But it also requires Finance Minister Edun and the National Salaries and Wages Commission to regularly review salaries and wages to reflect the rising cost of living with each devaluation of the Naira. After all, there are laws that require periodic salary adjustments.
If successfully implemented, this strategy should optimize foreign remittances to Nigeria, facilitate payments for Nigeria’s imports, and facilitate Edun’s ambitions to provide jobs to Nigeria’s unemployed youth.
x@lekansote1, lekansote.com
