‘How Nigeria can tackle inflation, forex crisis’
Economic diversification, local manufacturing, favourable policies, infrastructure and security have been listed as solutions to inflation and exchange rate issues in the nation.
Speaking at the first Biennial international two-day conference, organised by the Department of Economics, Anchor University, titled “Exchange rate management in a globalised world and the Nigerian economy”, Lecturer, Department of Economics, University of Lagos, (Unilag), Babatunde Adeoye said a secure country would encourage foreign direct investors.
According to him, you do not expect an investor to take his portfolio of resources to a country that is not safe. These are some of the key fundamentals we need to fix.
“How do we encourage foreign direct investment? We need to reduce the demand on forex by patronising locally produced goods, utilising local health care institutions and others”, he said.
He explained that the 1986 Structural Adjustment Programme (SAP) approved by the exchange rate management policy in Nigeria was the beginning of volatile rates.
He stated that the objective of exchange rate in Nigeria is to reduce dependence on imports, incidence of capital flight, eliminate payment arrears and encourage local input, but noted that the goals have not been achieved.
“Exchange rate regimes have not been able to achieve their objectives due to the non-diversified economy. So we need to look inward for solutions that would revive the economy,” Adeoye added.
He said factors that can affect the exchange rate include money supply, interest rate, inflation degree of financial growth and others.
Adeoye added that Central Bank operatives allegedly own 90 per cent of bureau de change firms. “As long as you create room for the parallel market, it would be difficult to control.
Associate Professor, Department of Economics, University of Lagos, Dr Dele Balogun, noted that the exchange rate reflects two main desires by every nation, which is to stabilise exchange rate as a veritable tool for macroeconomic stabilisation, stimulate economic growth and foster intra/extra-regional trade stimulation.
According to him, the focus of monetary policy objective and implementation in Nigeria is the promotion of economic development with less attention paid to inflationary control.
“Independently pursued domestic monetary policies were expansionary because of the high degree of fiscal impetus and intervention in monetary policy formulation and implementation,” he said.
He added that Nigeria could be characterised as a small but relatively closed economy in a macroeconomic sense as she can hardly influence global developments in trade and finance.