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Opinions of Tuesday, 9 November 2021

Columnist: Samson Ayooso

Stemming fall of naira

Naira Naira

The Nigerian economy has hardly had it this bad in recent times, with the inflationary rate as high as two digits and the naira value exchange for as high as about N600 to $1 at the parallel market and at the official market rate. Nigeria’s naira’s spiralling fall against major currencies of the world like the dollar, pounds and euros has been like this for months. Defying all attempts by the Central Bank of Nigeria, through its monetary policy framework, to arrest the slide.

Nigerians need foreign exchange for medical or health tourism. For instance, those going for better medical care treatment or referrals overseas mainly because of our poor or inadequate health facilities. This category of people buy forex for their journey, lodging and upkeep, accommodation then cost of actual treatment in the foreign country. The expenses can be very exorbitant running to hundreds of thousands in foreign currencies e.g. countries like Dubai, India, South Africa, the USA, the UK, Germany, etc. top the list. This was not the case hitherto.

Another reason for the high demand for foreign exchange by Nigerians is education tourism. Many Nigerian youths are schooling in high schools, colleges and universities overseas. During the admission process, you see scouts or representatives from these institutions thronging our schools and hotels trying to convince parents and students why their institutions – in Ukraine, Cyprus, Canada, USA, the UK, Dubai, United Arab Emirates, Malaysia, etc – are the best choice. These students need forex to pay for tuition, travel expenses, visa, accommodation/lodging and feeding etc. Parents/guardians and students spend tens of hundreds of thousands in foreign currency to meet up all these demands and requirements.

The manufacturing sector or the organised private sector and small and medium scale enterprises also significantly make use of forex. They import spare parts and machinery from foreign countries or in some special cases like the conglomerates from their parent country eg. UAC, NB. Plc. Unilever, PZ, P&G, etc. Then, of course, they import raw materials or additives for the manufacturing process in their various industries.

Lastly, the Federal Government through its ministries, departments, agencies and parastatals buys forex for its own use usually for the importation of goods and services relevant for its day to day performance and operations.

Furthermore, there are other importers who use forex to import goods in the prohibitive lists of illegal and contraband items. All these put strains on the hard-earned forex, seeing the enormous demand and need of a large developing nation for forex to run a burgeoning economy like ours. We as a people ought to be circumspect and do the needful.

Be that as it may, the Federal Government through the central bank has tried to plug loopholes in the operations of Bureau De Change to check any sharp practices like speculations or hoarding and make sure it sells forex to genuine buyers. Also, the CBN has intervened in its regular disbursement at interbank foreign exchange sales of foreign currency that priority should be given to small and medium scale enterprises and industries. This is to help shore up and boost the local economy by building capacity for our local industries and increasing capacity utilisation for our manufacturing and production sector.

The Federal Government can do more through legislation and pragmatic steps by making sure its backward integration policy is not just taken as lip service. Agriculture must be seen to be run as a business venture or enterprise and export-oriented for commercial purposes, not for subsistence or small farmer holdings. It should be mechanised so that it can contribute to the GDP. If this is done and Nigeria is self-sufficient in food production, then we can be said to be food secure.

With food security, inflation will go down, our economy will be robust, we will have enough and even have for export to earn more forex that will go a long way in reducing the exchange rate of the naira to other major foreign currencies of the world. Thereby improving our foreign balance of trade rating.

Also, if the manufacturing sector is upscaled and our industries are producing at full capacity contributing their quota to the GDP by producing semi-processed and processed goods which is of better value for export. It will help diversify the economy, generating more forex needed for the country’s overall development and help reduce the depreciation of the naira.

Likewise, the small and medium scale enterprises should be better empowered and encouraged to be export-oriented and add value through special government schemes and programmes. All these are geared towards making them produce for exports and earn the needed forex required for the country’s development.

Additionally, punitive measures should be meted out on erring BDCs who flout the central bank’s rules and regulations as regarding sales and operations of forex. Also, other financial institutions like commercial banks should be properly supervised and monitored to ensure strict adherence to laid down laws and regulations guiding forex trading and handling.

Going forward, the naira will be able to withstand this slide if supply outwits the demand for forex and if our economy is rejigged as enunciated above by diversifying it. As well as attracting further foreign direct investment which will help improve and increase employment that will, in turn, boost the economy by improving purchasing power of the average Nigerian which will in turn increase capacity for people to patronise goods and services.