Victor EzejaAs Nigeria continues to experience foreign exchange (forex) crisis, leading to a steep depreciation of the naira, an economic expert has attributed the cause to activities in the political circle which puts high pressure on the system.
Energy economist, Dr Onuoha Nnachi, who is the Managing Partner, DPH Investments, said that apart from the fact that the country has low production, coupled with demands by manufacturers, that of the political class puts more pressure on the foreign exchange market in the country.
Dr Nnachi, who appeared on Channels Television Sunrise Daily show on Tuesday morning, accused the political class of “dollarizing corruption.” He claimed that there is no sitting state governor in the country today who does not do up to $1 million in purchases of foreign currency for use. He said he had studied the trend over time and found out that up to a 5 per cent jump in the exchange rate occurs at the end of every month.
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“People think that the pressure comes from we not earning enough (forex). It may not be right. I beg to differ from that. Yes, it could be a contributing factor. People also think that the demand from the manufacturers is too much because we’re not producing. Yes, but have you ever paid attention to the political demands of the leaders? It is amazing. On average, there is no governor that sits in Nigeria today that does not do up to $1 million purchase.
“I have studied it. At the end of every month, you see up to 5% jump in the exchange rates where is the pressure coming from, let’s be honest with our ourselves. Our corruption has been dollarized. So, it’s making that pressure so high,” Nnachi stated.
The financial expert and policy analyst rued the profligate lifestyle of politicians which makes them spend recklessly. Stating that the pressure is getting high on the economy, Dr Nnachi stressed that there is a need for drastic a measure to address the situation. He maintained that only honesty by those in the corridors of power would save the situation in the country.
Nigeria, described as the giant of Africa, has been fraught with macroeconomic challenges such as foreign exchange volatility, high-interest rates, high inflation rate and debt. The inflation rate has increased 25.8 per cent from 24.08 per cent in July, marking the highest rate since September 2005. The increase, according to analysts, reflects the impact of the removal of fuel subsidies, the devaluation of the official exchange rate and security issues in food-producing parts of the country. The CBN has also raised the Monetary Policy Rate (MPR) to 18.75 per cent.
As the Senate screens the acting Central Bank of Nigeria (CBN), Dr Olayemi Cardoso, and four other deputies, there are high expectations that the apex bank’s new management team will highlight strategies to deal with the present challenges for the economy to be strengthened.
Nnachi advised that the new CBN management team should focus on getting the key microeconomic indicators to work for the country to see a positive change in the economy. Some of them he said include controlling inflation to be at a manageable level, controlling forex, stimulating activities to improve the nation’s GDP, and also creating an open-door policy to allow inputs from independent-minded Nigeria experts on what to do to salvage the situation.
Speaking further on measures to address the pressure on forex, he suggested that the National Financial Intelligence Unit (NFIU) should increase their surveillance to track the movement of currencies across the country and increase their forensic checks on state accounts and also the activities of bureau de change operators to limit the negative impacts of such activities on the economy.
On what he expects during the screening, the economic expert said: “I would expect the Senate to probe them more about their economic recovery plan.”
Speaking on intervention programmes by the CBN administration, Nnachi said the bank should use the right established institutions for implementation. He pointed out that the last CBN administration while implementing the Anchor Borrowers Programme, did not use appropriate development institutions like the Bank of Agriculture that would have eventually located farmers who were the real beneficiaries. According to him, CBN’s approach to the implementation of the programme made it unable to recover the funds given out to supposed farmers who saw it as free money.
He maintained that using the right institutions for any intervention programme would help to ensure that the right beneficiaries are located, and the impact felt.
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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