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It is now almost a national sing-song that the nation’s currency, the “Almighty naira” of two generations past, is falling beyond redemption. All efforts by the President Bola Ahmed Tinubu administration to shore up the strength of the naira appear to be yielding a completely opposite result. The first two weeks of “floating the naira” appeared to have sounded the death knell for the notorious round-tripping that weakened it during the better-forgotten Emefiele years at the helm of Nigeria’s apex bank. From nearly N820 to the dollar, we witnessed a sharp reduction to N700/$1 and a never-seen reduction in the gap between the “official” and parallel market exchange rates to a bare N50. The cabal that had held the national economy by the jugular appeared to have lost their control on it, as hope glittered. A false hope this has turned out to be, as the naira unbelievably began the downward spiral to almost N1,350/$1.
Although it is clear that the present administration inherited an unbelievable myriad of problems, the most damaging, as of today, is clearly the challenge of giving value to the naira. How did we get here? Is there any hope of a reversal? Can the national currency ever manage to rebound and trade at a fair exchange rate that enables the country to rebuild its seemingly collapsed economy? Going by the realities of today, the answers to these burning questions appear to be a sadistic NEGATIVE.
This article will attempt to highlight critical issues that are either yet to be seen by the current managers of the nation’s economy, or have built up to become insurmountable mountains, and proffer a few recommendations to what could become a veritable march towards economic revival, if taken into implementable consideration by the powers-that-be.
The first point we would like to stress here is that the exchange rate of a nation’s currency cannot be legislated. The strength of a country’s currency is, in all cases, determined by that country’s foreign reserves, and its performance in global trade – a terrain described by the International Trade Center (Geneva) as fiercely competitive. There is, unfortunately, no amount of Tinubunomics that can revise the current fall of the naira until the government takes a bold step to boost non-oil exports. While being careful not to be tagged a doomsday prophet, we hasten to state here that the spirited efforts to “flood” the forex space with $10 billion (or even $50 billion) will, at best, be a sporadic response and temporary measure, as these are not sustainable over the long term.
No amount of borrowing to shore up the availability of new dollars in the foreign exchange market can provide a sustainable (never even a permanent) solution to the current currency crises. In the same vein, government’s current efforts to widen the tax-net will doubtless enlarge the nation’s internally generated revenue (at the risk of killing budding nano, micro, small and, medium enterprises), but can never boost the nation’s foreign reserves; at least, not to the level that a virile non-oil exports sector can!
The biggest killer of Nigeria’s economy remains the country’s erstwhile over-dependence on crude oil exports as its main source of foreign exchange earnings, since the damaging discovery of the demon at Oloibiri in the late 1960s. The discovery, which was widely celebrated and led the country into the “oil boom” era has turned out to be Nigeria’s doom. Can the doom be reversed and the economy reset onto a path of new glory and boom? We answer a very big YES. But this ‘yes’ depends on a firm understanding of how Nigeria’s economy can be reconstructed using non-oil exports as bricks and pillars.
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