NIGERIA’s exchange rate problem would most likely persist as the country pays less attention to industrialisation despite being largely an import dependent nation, the ICIR findings have shown.
Last week, the World Bank cautioned Nigeria against its N4 trillion payment on subsidy, in addition to the complications arising from its multiple exchange rate regime.
Nigeria’s Central Bank Governor, Godwin Emefiele, has since responded to the global lending body, saying the Federal Government adopted a management forex float to handle its exchange rate problems.
Emefiele said, “Both the IMF and World Bank are our prime development banks, and we have received support from them at different times in resolving some of our economic challenges, particularly bordering on finance.
“Nigeria’s situation is very peculiar and that is why we have continued to engage the IMF and World Bank to show understanding of our local problems. And they are, indeed, showing understanding.
“Yes, they want us to freely float the exchange rate and you do know that this will have some impact on the exchange rate itself in the sense that when you allow that to happen, you will have some uncontrollable spiral in the country’s exchange rate.”
He explained that what the CBN was doing was managing demand by curbing excessive imports such as petroleum products and commodities.
THE ICIR findings have shown that apart from subsidies and poor management of foreign exchange, Nigeria has paid less attention to industrialisation that can enable a productive economy.
The development has led to a surge on importation bill and more demand of foreign exchange, as the country remains largely import dependent.
Consequently, Nigeria’s import surged by 54 per cent year-on-year to N6.85 trillion in the first quarter of 2021, from N4.44 trillion recorded in the corresponding period of 2020, as contained in the foreign trade report recently released by the National Bureau of Statistics (NBS).
The recent import data also represents a 15.6 per cent increase, compared to N5.93trn recorded in the previous quarter.
Industry analysts say Nigeria must go beyond addressing the foreign exchange challenge and fix the productive and industrial aspects of the economy.
“All these years, we have been addressing mostly financial issues such as the exchange and interest rates, whereas these are just indicators,” said a financial expert, management consultant and former Presidential Adviser, Biodun Adedipe.
According to Adedipe, every economy sits on a tripod, which comprises production, consumption and trade.
“When your economy begins to tilt more towards consumption than what you produce, then there’s a disconnect. It reflects in your trade and it will be more controlled by external vulnerabilities.
“This shows and exposes lots of imbalances in trade, payments and exchange value of your currency. It is because of these imbalances that we are having all these crisis in FX.
“We need to fix our industrial sector to lessen our import bill and put less pressure on our foreign reserve,” he stressed.
On how the economy can bounce back, Adedipe said the government must, as a matter of urgency, incentivise key sectors that must drive wealth and job creation.
“We must be selective and deliberate about the sectors we want to incentivise and how we are going to maximize them for wealth creation,” he added.
Also, an economist and former presidential aspirant on the platform of the Abundant Nigeria Renewal Party, Tope Fasua, said at the point Nigeria is now, it must launch a massive attack on the economy.
Fasua said, “We must move beyond oil as the major contributor to our economy. Other sectors must also contribute appreciably to the coffers.”
A recent World Bank report had stated that Nigeria could enable millions of citizens to escape poverty over the next decade through enacting bold reforms designed to boost economic productivity.
The report warned that without robust productivity growth, living standards would continue to deteriorate and the number of people living in poverty would continue to rise, increasing by more than 30 million by 2030.
“Nigeria’s population is expected to grow by as much as 35 million in the next decade, and unless the pace of growth and job creation accelerates, the country will account for a quarter of all people living in extreme poverty worldwide,” said Marco Hernandez, World Bank Lead Economist for Nigeria and co-author of the report,“ adding that creating new opportunities for the rapidly increasing labour force would require a new economic model based on productivity growth.