Since the beginning of 2015, the value of the Naira relative to the Dollar, has taken a nosedive. Yet, this disparity says nothing about the desirability of the Naira within Nigeria. But there are some who still view the fall of the Naira as detrimental to our national; and are holding PMB tn an alleged declaration in his campaign promises to make the Naira equal to the Dollar.
Since June, the present govt has been putting in place measures to prop up the Naira in the Int’l market. These measures include: suspending the use of domicilliary accounts; refusal to give Dollar bills to import certain items, or banning the importation of such items as Canned fish and toothpicks; the devaluation of the Naira; and the use of other discretionary monetary policies.
However laudable these initiatives are, I feel PMB is yet to truly understand the cause of this financial crisis.
And for me, this can be attributed to the lack of any economic blueprints, and the loathness to appoint a cabinent or any group of economic advisers. Some may argue that the CBN governor is capable enough to handles these tasks. But to me, I feel a group of advisers on economic affairs, made up of reputable personalities, such as those advising PMB on terrorism, will suffice.
But away from PMB, let’s consider the causes of the Naira slide.
Firstly, we must recognize that Nigeria is import-dependent. And as a result, vulnerable to sudden currency changes. The demand for imported products outweighs our exports. Thus, Nigeria has an unfavourable balance of trade. And since we pay for foreign using the Dollar, and not Naira, the govt must constantly buy more dollar. This demand and supply reality is at the root of the present economic crisis. But that’s not all.
The fact that much of our exports is based on one commodity, oil, means that we’re even more vulnerable to economic crisis. For instance, when the price of oil is high, the country makes a lot of export gains, plus foreign investment in the oil sector increase, thereby boosting the value of the Naira. But when oil prices are down in the int’l markets, reverse is the case.
And it’s no surprise our financial crisis is coinciding with low prices of oil globally. A phenomena since November. A discourse outside the scope of this article.
What’s The Way Forward?
First, PMB should disclose his economic agenda. It may seem innocuous, but the revelation of the PMB administration economic plan could have a really huge impact on not just the currency value, but the entire economy.
And following his victory and resumption of office, the stock market rallied and hoping for a new economic direction. But eversince, things have looked stale.
According to some newspaper reports, much infrastructural projects have been suspended.
This is obvious, because the revenue forcast for the FY2015, with the plummeting oil prices, has already taken a hit. And borrowing against the current state of the economy, and the fact that the rationale for some of these projects needs to be reevaluated, is unadvisable.
But, PMB is a quien anti-graft campaign and govt restructuring agenda. And while this a good move, the economy and Nigerians are suffering aloud and in silence respectively.
Investors with the needed capital are on their toes, waiting for this blueprint; while the labour force, large numbers already unemployed or underemployed, are biting their nails, waiting for the policies that will get them jobs.
Second, Nigeria must stop being import dependent. As said earlier, the present financial crisis reveals once again how vulnerable and dependent Nigeria is to imports. Thus, a good policy prescription would be that of “import-substitution”; which is the devt of local industries to produce itens that the country had been importing.
These industries should receive subsides or tariff protection, rather than direct govt funding.
I believe with both these two ideas, Nigeria can develop itself greatly.