What Nigerians Must Do To Save Naira From Further Depreciation—CBN

The Governor of the Central Bank of Nigeria, Mr. Godwin Emefiele; an Economist and a member of the Monetary Policy Committee of the CBN Prof Michael Obadan; the Chief Executive Officer of Global Analytics Consulting Ltd, Dr Tope Fasua and the Managing Director of Cowry Assets Management, Mr. Johnson Chukwu have proffered strategies on what Nigerians must do to save the Naira from further depreciation.

They made the suggestions on Thursday at the 32nd seminar for Finance Correspondents and Business Editors held in Akure with theme, “Exchange rate management economic diversification in Nigeria: The PAVE option.”

Over the years, many fundamental factors have contributed to instability of the naira in the exchange rate market, some of which are weak production base and undiversified nature of the economy.

There is also the issue of low productivity in the economy; high propensity to import compounded by trade liberalization policy; comatose capital goods industry as nearly all machinery, equipment and spare parts used by the production sectors are imported, thereby putting much pressure on available foreign exchange.

In his presentation at the seminar, Obadan said Nigerians should start reducing their huge appetite for importation as this is increasingly pushing pressures on the naira.

He said each Nigerians import what the country has comparative advantage in producing, such action is affecting businesses and the economy negatively.

To improve foreign exchange earnings and achieve exchange rate stability, Obadan said there is need to target the management of the demand and supply side of the foreign exchange equation.

Specifically, he called for revival and rebuilding of the productive sectors of the economy to achieve higher capacity utilisation and competitive manufactured exports.

He also said there is need to vigorously implement the development finance interventions of the Central Bank targeted at increasing non-oil export earnings such as the RT200 FX Programme, 100 for 100 Policy on Production and Productivity, Export Development Fund, and Non-oil Export Stimulation Facility among others.

He advocated strong government encouragement of local refining of petroleum products for both domestic consumption and exports as well as reduce foreign exchange demand to import refined petroleum products.

The MPC Member also called for strong and effective surveillance of the foreign exchange market by the monetary authority to check round-tripping of foreign exchange from the Deposit Money Banks to the parallel market as well as increase the sourcing of local raw materials and revival of the capital goods industry.

According to him, promotion of fiscal and monetary discipline and harmony is vital as it will check excessive official demand for foreign exchange.

Obadan also called for the creation of an enabling environment for productive capital inflows, especially foreign direct investment as well as actively promote restoration of confidence in the economy to check capital flight.

He said, “Lets rationalise imports structure to manage demand for foreign exchange. As may be permitted by supply considerations, use the stock of external reserves to support the exchange rate through increased funding of the foreign exchange market.

“Use moral suasion to encourage Nigerians to patronize home-made goods and reduce their high propensity for importation of all kinds of goods and services.

“Import only when it is absolutely necessary. They should also eschew unhealthy speculation in foreign exchange as well as rent-seeking behaviour and adopt positive attitudes towards ensuring a stable exchange rate for the naira.”

In his speech delivered at the event, Emefiele said the apex bank has implemented measures to cushion the impact of the drop in the supply of foreign exchange on the economy.

He gave some of these measures to include the introduction of demand management approaches to conserve the reserves and support the domestic production of certain goods, encouragement of manufacturers to consider local options in sourcing for raw materials by restricting access to FX on some items.

In addition to these measures, Emefiele said the CBN also established an Investors and Exporters Window (I&E), to allow for purchase and sale of Forex at prevailing market rate.

He said, “As a result of our demand management policy, the naira has remained largely stable at the I & E window, particularly since the discontinuation of FX allocation to Bureau De Change operators along with the convergence between the CBN and NAFEX rates.

“Banks are now able to meet the demands of their customers seeking forex for SMEs, school fees, medical and PTAs. Our current account deficit has narrowed significantly due to a surplus position in the goods account.

“The surplus position in the goods account is occasioned by a reduction in imports, increase in crude oil and gas export receipts, and improvement in remittances. Remittance inflows has been supported by our ‘Naira for Dollar’ scheme, and we have seen a surge in remittance inflows.”

The Governor said the initiative of the CBN tagged “PAVE’ an acronym of Produce, Add Value and Export, is expected to make Nigerians consume what they produce, add value to it, and even export the surplus.

“It is an initiative akin to South-East Asia’s much referenced export-led industrialization policy which changed the economic fortunes of countries such as South Korea, Taiwan, Malaysia and Singapore.

“PAVE is designed to be the key for fast-tracking a bucket of substitutes to Crude oil export. It encourages backward integration for the local production of select items,” he added.

In his submissions at the event, Fasua said the government needs to come up with productive policies to strengthen the value of the naira.

“The problem lies in economic complexities. We need to move beyond mere primary products to adding value. Our biggest imports are technology and then PMS,” he added.

In his comment at the event, Chukwu said without the right human capital, Nigeria cannot become a productive economy.

He said, “We need an education system that will develop the competence of those that will make up the productive sector of the. We must develop our agricultural capacity to enable us have comparative advantage. We need supporting infrastructure to boost productive capacity.

“If we don’t have the right human capital, our population will not be productive and you won’t be able to attract the right type of investments to boost production. To fix the country, we must have right human capital with supporting infrastructure.”