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Experts proffer solutions to Nigeria’s exchange rate problems




THREE experts on the Nigerian economy have proffered what they believed would be solutions to Nigeria’s exchange rate problems.

The naira has been experiencing  a free fall since the beginning of the year, with the currency selling at the black market today at N615.

The implication has been devastating for the Nigerian economy, which remains dependent on imports, which themselves depend on mostly the dollar to be brought in. The dollar has been scarce to get as Nigeria suffers from low production of crude and theft of the product, thus earning less foreign currencies, especially the dollar.

An effect of the endless fall of the naira and import dependence has been inflation, especially as Nigeria imports petroleum products, which are key to everyday life in the country, from manufacturing to transportation.

Premium motor spirit (petrol), which Nigeria has been importing following bad leadership, corruption and mismanagement that resulted in the crash of its four refineries, has been selling lately for between N180 and N250 per litre at independent filling stations. Independent marketers have declared they can no longer sell at the official price of N165 per litre. Abuja, Lagos and some other major cities have been experiencing scarcity of the product and long queues at filling stations.

The price of diesel, a major petroleum product in production and long-haul transportation, has also gone up. A litre now sells for N800-N900, up from about N250 it was selling in January this year.

Also up is the price of cooking gas, from about N4000 to N5000 for the I2.5 kilogrammes to the current rate of about N9,500 to N10,000, just as the price of kerosene has also spiralled well above 100 per cent between January and July 2022.

The National Bureau of Statistics (NBS) recently released the inflation figure of 18.6 per cent year-on-year in June 2022.

Emefiele Godwin
Godwin Emefiele, CBN Governor
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Nigeria’s inflation rate increased to 16.95 per cent in 2021, from 13.25 per cent, and rose further to 17.7 per cent in May 2022, from 16.82 per cent recorded in the previous month.

The Fiscal Policy Partner and Africa Tax Leader at PricewaterhouseCoopers, Taiwo Oyedele, remarked that Nigeria was not earning the required forex to meet its needs.

Oyedele urged the government to review the list of 43 items that have been prohibited from accessing dollars for importation

He said, “The first thing I would do is review the policy on 43 items prohibited from accessing forex for imports. Those items are not contraband but are restrained from accessing forex for imports.

“The problem is that those who are not on that list are not getting the forex. Some manufacturers recently said you would be lucky to get five per cent of the forex you apply for from the Central Bank of Nigeria (CBN). About 70 per cent of forex used in importing diesel is from the black market, hence the increase in the price of the product.”

Oyedele asked the Federal government to allow everyone who wants to import anything to go to the market and bid. He advised the government to stop restricting forex for the importation of some products. He believed that a holistic market for importers to bid would be better.

The tax expert also noted that the policy of exporting at N615 while remitting through the government at N415 is not viable. He also urged the government to address crude theft.

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The Chief Executive Officer at Cowry Asset Management Limited, Johnson Chukwu, said Nigeria would have to start exporting processed products to improve the value of the naira, and revitalise the country’s refineries to check foreign currencies being expended on importing petroleum products and the attendant inflationary push.

Chukwu also said, “Many global currencies have suffered depreciation against the dollar,  but it is worse for Nigeria, which is importing petroleum products even as an oil-producing nation.

“What we should do in the medium-to-long term is that we must be a producing economy. We must be a manufacturing hub. If you don’t have quality things to export, then your policy will come under pressure under any crisis. We are basically still exporting crude and importing refined petroleum products.”

The Managing Director/Chief Executive Officer of Financial Institutions Training Centre (FITC), Chizor Malize, corroborated, saying Nigeria now needs to move from consumerism to production to prevent any form of currency crisis.

Just recently, finance experts warned Nigerian companies seeking foreign-denominated loans to have a rethink as global economies responded to hyperinflation with aggressive monetary policy tightening.

Already, consumer prices in the United States have skyrocketed to 9.1 per cent, the biggest 12-month increase since 1981, and up from an 8.6 per cent jump in May.

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The International Monetary Fund (IMF) chief, Kristalina Georgieva, has tasked the G20 countries to do everything in their power to reduce inflation.

Meanwhile, recent data gotten from the CBN revealed that the number of bureau de change operators in Nigeria has risen by 75 fold in 16 years, from 74 in 2005 to 5,689 in 2021. This is coming despite many warnings by the World Bank to Nigeria to unify its exchange rate, which the CBN has been unable to do.

Author profile

Experienced Business reporter seeking the truth and upholding justice. Covered capital markets, aviation, maritime, road and rail, as well as economy. Email tips to jolaoluwa@icirnigeria.org. Follow on Twitter @theminentmuyiwa and on Instagram @Hollumuyiwah.

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