Victor EzejaConcerns about the impact of persistent depreciation of the value of the naira on Nigerian economy have continued to worry stakeholders in different stakeholders.
With the local currency recording a new low of N1,400 per dollar in the parallel market exchange window on Thursday, economic experts have advised on measures that should be taken to stabilise the naira and strengthen the economy in the long run.
According to reports, naira value dropped to a historic low of N1,410 in the black market on Thursday, a N45 or 3.29 per cent decline from the Wednesday closing rate of N1,365 per dollar.
The naira has continued to experience continuous fall since the foreign exchange reforms that involved floating of the naira in the forex market.
Reacting to the ugly trend of the naira depreciation, Chief Economist & Partner at SPM Professionals, Mr Paul Alaje, listed five measures that need to be taken to gaurantee a stable naira.
In a statement via his X handle, Mr Alaje stressed the need for a collective effort to bolster confidence and faith in the naira and the Nigerian economy generally.
He also advocated a change in the dominant economic activity which is currently Service-based to a production-priemted one, steming from increased large-scale manufacturing, and agricultural activities value chain, among others.
Alaje further harped on the need to promote export of finished goods more than imports, to increase Non-oil foreign exchange earnings.
His statement reads: “What must we do to guarantee a stable naira:
“1. Ensure confidence and faith in the currency and the economy of Nigeria.
“2. Change the dominant economic activity from service to manufacturing, agro-allied, and plantation.
“3. Promote export (especially Export Promotion and Import Substitution).
“4. Discipline by the monetary authorities within the FX market.
“5. Convergence of policy by the monetary, fiscal, and trade authorities.
“These should be the direction.”
The economic expert further advised against “Using a quick fix or interventionist approach,” warning that it has never been sustainable for the country.
“N1,400 to a USD is not for anyone’s good. This may drive inflation higher and affect the real GDP,” Alaje warned.
Nigeria Operating Rentier Economy – Prof Moghalu
Also commenting on the unprecedented downward spiral of the naira, former Deputy Governor of the Central Bank of Nigeria (CBN), Prof. Kingsley Moghalu, said the problem with the local currency crisis was not because it was “floated” but failure to diversify the economy away from reliance on natural resources for supply of forex “towards an export economy based on value-added manufacturing and services,” Moghalu stated via his X handle on Thursday.
He pointed out that the reason for the failure stems from Nigeria’s political culture that encourages “a rentier economy.”
“The problem with the Naira today is not that it was or has been ‘’floated’. In any case, we no longer have the oil revenues (for various reasons) to underpin a managed float with robust foreign reserves.
“The real failure of Nigerian economic policy is that of having failed to diversify its economy away from reliance of natural resources for forex supply towards an export economy based on value-added manufacturing and services. This is the zone of industrial and trade policy. The reason for this failure lies in Nigeria’s political culture that fosters a rentier economy.”
Prof. Moghalu gave examples of countries like Malaysia,Thailand and Chile, who according to him, were originally resource-based economies, but were able to successfully achieve “economic complexity” over time, through “manufacturing and exporting increasingly sophisticated products.”
He stressed that for Nigeria to achieve that, it must shed off current culture that encourages mediocrity instead of emphasis on competence.
“The level of political will required to change course is extraordinary, and requires a focus on merit and competent technocratic management rather than crony- empowerment based on vested self interest. Until these fundamentals are fixed, there is little hope for the Naira.
“The world has changed from the days of our being awash with oil money. Many other countries that are not in OPEC now produce massive amounts of oil,” Moghalu stated.
Victor Ezeja is a passionate journalist with six years of experience writing on economy, politics and energy. He holds a Masters degree in Mass Communication.
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