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‘Continued Depreciation Of Naira Is Predicated On Many Factors Including Speculations’

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Uba

Uba

What is your view on the rising exchange rate and the state of the country’s economy?

NIGERIA is believed to be the largest economy in Africa after rebasing its Gross Domestic Product (GDP). However, with the continued depreciation of the Naira, that claim has come under serious threat.

There’s no gainsaying that the rising cost and scarcity of Dollar is affecting a lot of businesses in Nigeria, especially the manufacturing sector whose raw materials are mostly imported. Many organisations are becoming insolvent as a result of accumulated debts arising from their inability to pay their suppliers abroad.

If this is not well managed, it will ultimately lead to reputational risk for the organisations concerned. Jobs are being lost daily as a result of closure of businesses and when all these factors combine, will ultimately lead to the decline in overall national productivity.

It is important to note that part of the causes of the rising cost and Dollar scarcity is predicated on speculation and therefore, artificial. What has Dollar scarcity got to do with a market woman selling her vegetables? It may interest you to know that everyone claims that the increase in prices is predicated on Dollar scarcity, but that is not true as Nigerians capitalise on any little opportunity to make fortunes.

Do you subscribe to the view or call by many for further devaluation of the Naira?

It is important to state that Naira has not been devalued; hence, the question of further devaluation does not arise. What has happened so far is the depreciation of the Naira. Many people have argued either in favour or against Naira devaluation. However,

I do not subscribe to the devaluation of the Naira; rather, I would recommend independent floating of the Naira. The CBN is currently using the managed float exchange rate management system. The question that arises is: what factors determine the managed float rate? My best bet is to encourage market forces (demand and supply) to determine the exchange rate at any given time. This is important given our depleted foreign reserve and declining oil price. Who knows, using the concept “independent float” instead of ‘devaluation’ may be better as it saves us the negative perception attached to currency devaluation.

As I stated earlier, the continued depreciation of Naira is predicated on many factors including speculations. With an independent floating exchange rate management, the “bloated and unreal” exchange rate arising from speculations would be removed.

Many economists and policy analysts have argued either in favour or against devaluation. A country devalues to make her exports cheaper and import expensive.

Outright devaluation would have been ideal if we have an enabling environment for the manufacturers to produce for export.

It may interest us to note that selling Dollars at the official exchange rate to importers would mean handing them immediate unearned profit of N168 (the difference between the parallel market rate of 365 and the official rate of 197) per dollar received from the CBN. The argument of inflationary burst by the CBN is not proven.

Currently, the parallel market exchange rate represents the real exchange rate. It is also important to note also that the insistence of the government to allow the current managed exchange rate of N197 against the parallel market rate of 365 reflects a hidden tax of about 45% on non-oil exporters.

There are also divided views on whether Nigerians should now focus on consumption of locally made goods and pay less attention to foreign goods. Do you think the argument can solve the problem in a country that relies heavily on imported goods?

There is no straightforward answer to this question. England with all the oceans and rivers around them still import bottled water. The current exchange rate regime is already forcing most Nigerians to look inwards and adjust to local consumption.

Sooner or later, with the current fight against corruption, the elites would have no option than to queue in line. The Government can use policy instruments to discourage consumption of foreign goods as well as increase local production for local consumption and export.

Instead of the debate on whether or not to focus on consumption of local goods, the government should work to improve on our trade balances by increasing our export potentials.

Is government’s effort towards tackling the challenges in the economy over the fall of the Naira encouraging enough?

I am convinced that the government is working to assiduously tackle the challenges. However, it seems such efforts are either not well communicated or appear to be synonymous with one “blinking in the dark”. One commentator described government’s efforts as “trying to solve a 21st Century problem using 18th Century approach”.

It is evident that such an approach would not yield the desired result. Nigeria has gone through this circle 30 years ago in 1986. The State government’s insistence on sharing of our accrued reserves/excess crude money is part of the reasons for the depleted reserves. As a country, we need to take a definite decision on how to economically and politically restructure the country. Government should be bold enough to remove fuel subsidy without further delay.

More than 40 per cent of forex demand is from the oil and gas sector. All market parameters and indices indicate that whereas government claims it has removed subsidy, there is still fuel subsidy.

What do you suggest should be the way out in the present situation?

Nigeria’s present economic situation is a product of over-dependence on oil and “sharing and feeding bottle” syndrome.

One of my mentors summarised the problem as function of “eating our dinner as our breakfast”. More worrisome is that we spend our savings on nothing. It was shared amongst the elites, politicians, portfolio business people and economic rogues. No real investment was made to diversify the economy by improving the business environment while investments in social sectors kept declining; security (sharing) votes were increasing. The best approach out of the present situation is to diversify our economy from oil.


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24 Comments
  • Makky Makky

    Please someone should remind the president that repairing of roads is a constitutional right to the people of Nigeria, There is a different between a promise and constitutional right of the people

    • Bodam

      A right that has never been given (abused) by previous Govts and nobody cares…
      If this Govt wants to redeem ur rights, won’t that be a wonderful thing???
      Moreover it’s time we address the disease and stop attacking the symptoms as we usually do!!!

      • Mr. C.

        Pls stop deceiving urself with all these symptoms and diseases issues and lies
        . We are smarter than these lies and disguise.

        • Bodam

          Good to know u are smarter… guess, ure just not sensible enough to understand basic issues. If u wake up one month and ur salary is slashed by over 60%, only a sensible wife will understand that the hard times will come, but a non sensible one will not try to understand but always demand for more!!!

          • otigbu

            @Bodam,so we are now married to PMB and APC, and we have no choice, but to sensibly understand their failures . May be you are one those men that find it easy to make promises to women, when you know you dont have the capacity to fulfill them.cos you want to exploit them and then leave them to regret ever believing you

          • Bodam

            Hmm… yes we are married to PMB and APC till 2019 at least!
            And since when people are married they are in it for better or worse… no need fretting when it’s worse, it can never be good all the time!
            The ish is: is it a fault of your spouse that u are in ur present predicament: obviously NO! Why the need to be a sensible spouse 🙂
            But in all seriousness, 2019 is when the final exams will take place, using the first test as a confirmed picture of what will happen at the final exams is kinda lame, u see! Not when the student didn’t know this elective needed to be taken.
            I’m more focused on budget implementation: the capital side that is, still much work to be done on the recurrent! If efficiently and effectively implemented; the level of implementation will give u a picture of how the final exams will look like, until then… I’ll advise u chill 🙂

      • amakachude

        Promise today and lai(oops lie) tomorrow.

        • TrueNja

          That is the slogan for the Yorubas in the APC.

  • jakiel

    THESE CONFUSIONS HAD BETTER TOP SO THAT NIGERIANS WILL NOT LEARN FROM IT AN ULTIMATELY BECOME A CONFUSED STATE. SO MANY DISCORDANT TONES ON SUPPOSED NATIONAL ISSUES INCLUDING BUDGET.
    APC PLEASE DO NOT LEAD THIS COUNTRY INTO CONFUSION.

  • Auta62

    Nigerians are already losing confidence in this APC government because of their many failings within a short period in government.

  • musa aliero

    One chance government

  • SWEET DADDY

    The aggrieved members of PDP headed by OBJ must be regretting their actions by now as ALL PROPAGANDA CONGRESS (APC) have failed those who voted for them because of the promised #5000 a month for the unemployed. One of the APC governor once said that paying workers salary was a privilege and not a right and you expect that group of people to pay the jobless. Before it was thieves running the Country but now it’s armed robbers and 419.

    • Stanley

      Before it was cluelessness but now it is calouslessness.

  • nuelsymbol

    This is not a matter of senseless augment . Ideally ,I would have expected the President to throw it for debate in symposiums and let eminent Citizens rub minds on this issue .Editor Guardian guide on this issue .

  • Ebaah Odibo

    “President has the prerogative to so review any policy at any given time….”
    What about Nigerians who voted for him based on those promises? It seems their opinion does not matter anymore since the election has been won. Take note however, that in a few years time, APC and PMB will return to the same people to canvass for votes. And they will make further promises….. Do Naija politicians make promises just to get votes? Once voted in, they will jettison their campaign promises?

  • Basketmouth

    Why is the issue of a meager 5000 naira stipend the only campaign promise that is of interest than all other laudable promises. It shows how the mind of the people has been bastardized to the extent that people no longer think in term of empowerment through knowledge but through handouts. I have never supported the idea of giving 5000 naira to people without a reliable data base of unemployed in the country. I believe empowerment through training and financial support through the directorate of employment will go a long way to ameliorate the economic situation of the teeming unemployed youths in the country.
    The government can best help the unemployed youths through a deliberate food program that give food stamps to people of low income. Giving food stamps or something similar will boost agricultural products and will drive a great number of people back to the land. America has used this and continue to use this to support the agriculture industry. The success of this is visible in the feeding program of students in Osun state. If the Osun school feeding program is replicated and expanded in the whole states of the federation to secondary schools, you can be sure that the economy will take a leap beyond everyone’s expectation. And this is just one way out of may other ways we can explore to expand and grow the economy in the short term.

    • Ace

      If the nation as a whole follows in the footsteps of Osun state, then the nation will b bankrupt in a few months

  • Abanigbe S. Adewale

    Simple as ABC. The generality of Nigerian youths want a responsive leadership and in my view, the president has offered this with change of gear on campaign tips of 5000 naira to unemployed youth.

    Dear governor Okorocha. How many miles will this sum cover in a month? How many meals will it place on the table per month? How much data and communication will it provide per month.

    We simply need sustainable infrastructure and meaningful credit acquisition at low or zero interest rate. Then, we will be fine.

  • Karstuff

    Right from the onset, I have known that it was the most unattainable campaign promise if ever the APC made that promise. The most gullible yet is for any reasonable person to ever think that the government can pay that stipend. It will be suicidal for the government to try to fulfill that promise and anybody trying to encourage them to fulfill that does not have the country in heart.

    • emeka

      Obtaining by tricks, OBT and 419.

    • Kingsley Onuoha

      No administration can do that.

  • emmanuel kalu

    This was a bad promise that shouldn’t have being made and I am glad the president is cancelling it. it was an avenue for pure waste and fraud. That amount of money could be investment in 100’s of things that would improve the economy. How about you use that money to meter the nation. The discos and consumer would repay the government over time. How about you use that money and set up federal farms across the country operated by NGO. Those farm and processing center would generate revenue for the government, provide jobs of the youth, help increase our food supply and reduce importation. giving 5k to the poor doesn’t do anything for the country, the economy or even the poor. what are you going to purchase for 5k?

    • emeka

      Why did you not tell the voters then that this was a bad promise. You allowed the voters to put you in power through a promise you knew was never going to be kept. Tell me another name for fraud if this is not one.

      • TrueNja

        There was never a time PMB made such promise during his campaign in 2015. It was the VP Osinbajo and Yoruba deceivers who made such promises.