SIR: Monetary economics is comparable to classics, an aspect of economics mastered by the few and its complexities loved by the fewest of the few. Despite this writer’s limited knowledge of its complexities, the basics of what empowers a currency is well absorbed – especially, when Naira is battling domestic and global threats pushing it to prostrate further for dollar. That nightmare must be averted.
There’s now need to examine top Nigeria’s imports: Oil/fuels ($16.14billion), machineries/electronics ($10.4 billion), vehicles ($3.44billion), cereals/wheats($2.74B), plastics ($2.54b). Identifying these top imports as sourced from “Statista” is important in order to understand our consumptions and appreciate a fundamental rule of balance of payment/international trade which confirms that a currency is more empowered through worth/volumes of exports. Other factors such as constant devaluation, speculation and less productivity have been argued as contributors to weak currency too.
Basically, Naira is getting more battered and more volatile because our imports outweigh our exports exceedingly; we import over 80% of what we consume and export less than 30%. The Russian crisis is also contributing to the volatility.
Who should we blame for this bigger mess and what should be done as first aid solutions? The government should be blamed largely for many reasons and specifically the administration of President Muhammadu Buhari for adding bad ointments to the existing wound. The indiscriminate devaluation of Naira more than four times, refusal to fix the refineries or facilitate new ones in order to relax the heaviest burden on dollars in importing refined fuel which is our highest imports and failure to aggressively pursue sufficient local production of some strategic products except for rice whose production is still insufficient despite trillions spent on interventions. On the other hand, citizens must also share in the blame mildly especially the privileged class; they must be blamed not for consumption of foreign goods which some people believe they are addicted to against the local products but less strategic entrepreneurial focus. Most privileged business elites in Nigeria are focusing more on service sector such as telecommunications, financial services, entertainment, hotel services, club ownership etc. to the exclusion of manufacturing of strategic consumer goods/FMCGs. The little aspect of the manufacturing sector is being dominated by very few Nigerians and mostly Indians, Lebanese (Asians) and Westerners. Nigerian entrepreneurs must see need for local manufacturing as a tool of patriotism and not just for profits like Asians. However, the government must take the lead.
It is indeed scary as our volatile currency will import more inflation considering global inflation threatening the world but the fire brigade or first aid solution we need now is to revive the refineries and allow for emergency operations to refine at least 30% of our crude. This is the most realistic first aid solution in my view and not increase in interest rate by Central Bank of Nigeria (CBN). We need to limit the oil imports as a matter of urgency and formulate midterm masterplan on how to minimize imports. The Bureau De Change (BDC) regulation is also relevant but not the most fundamental in my view considering the data provided. The question begging for an answer is why did this administration fail to rescue the refineries when it is aware oil imports consume the highest forex?
- Mujib Dada-Qadri Esq,
Abuja.