The meddlesome World Bank says that “By August 2024, the Ethiopian birr, the Nigerian naira, and Sundanese pound were among the worst (performing currencies) in the (African) region,” and added that “The naira continued losing value, with a year-to-date depreciation of about 43 per cent as of end-August.”
The acknowledgement by banker Chika Mbonu that the naira got weaker than the currency of many African countries has a counterpoise in the World Bank’s converse report that the Kenyan shilling got stronger by more than 21 per cent during the same period.
Bloomberg ranks the naira among the world’s 10 weakest currencies, three of which –Zambian kwacha, Angolan kwanza, and Nigeria’s naira– are from Africa. Their weakness is attributed to unstable commodity prices, inflationary pressures, and lack of dollar liquidity, a point of view that enables Euro-American metropolitan economies to prey on Third World economies.
But the weak naira needn’t be a disadvantage if President Bola Tinubu’s economic managers can flip things around, and take advantage of economies of large-scale production by getting the real sector, especially, to produce, for export, goods for which Nigeria has a comparative advantage. Investment banker, Dr. Nnaemeka Obiaraeri, says Nigeria has no currency problem but lacks productivity.
After the Naira gains strength from the accumulated foreign reserve therefrom, it should be further devalued– to maintain the weak regime that should earn even more convertible currency to finance the importation, and acquisition of more infrastructural and industrial production capacity that will eventually strengthen the naira.
But strengthening the naira will not be the only intent of this strategy, but is to reverse the current import-oriented trend of the Nigerian economy and tap the ready market for Nigeria’s manufactures in richer economies.
Nigeria’s fiscal, monetary, and macroeconomic policymakers should consider this unorthodox opportunity to strengthen Nigeria’s economy which is suffering from inappropriate economic policies that are imposed by Breton Woods institutions on an unwary political class.
Even non-economists know that consumers from other countries prefer to buy cheaper goods from economies whose currencies are relatively weaker than their own. America and China, countries with the world’s two biggest economies, are masters of this highly profitable game.
One obvious “low-hanging-fruit” place to start to take advantage of the tanking Naira is to encourage the export of petroleum products from the refineries of Dangote, Nigeria National Petroleum Company Limited, and others, to countries with stronger currencies than the naira.
Though subsidy has been removed, the depreciation of the naira still makes smuggling of Nigeria’s petrol and other petroleum products relatively profitable in West and Central African countries. Nigeria should take advantage of this ready market and redeem the N132 trillion revenue that the World Bank claims Nigeria lost to the subsidy.
Wale Edun, Minister of Finance and Coordinating Minister of the Economy, who was with Governor Yemi Cardoso of Central Bank of Nigeria, at the Group of 20 Economies meeting hosted by the World Bank and International Monetary Fund in Washington, DC., gave a rather simplistic submission that all Nigeria needs to do to strengthen its currency is to increase petroleum production.
That is true, but it’s not good enough, for an economy with the capacity to add value to primary commodities. It only feeds the concerns of foreign investors whose interest is how to easily remit their earnings back home. That is why Muhamad Sani Abdullahi, CBN’s Deputy Governor for Economic Policies, cockily disclosed that “Nigeria now has $40.2 billion external reserve.”
Abdullahi boasts that ramping up the foreign reserves is “a significant move, up from a year ago when (Nigeria had) less than $34 billion… to cover at least 14.3 months of import for goods and services, and 15 months for goods only,” neglects the productive capacity of Nigeria’s economy.
Abdullahi should have addressed Arise News TV Rotus Odirri’s inquiry about plans by the government, if any, to return Nigeria Incorporated to work again. The real sector is key to strengthening the currency of any country.
Invisible Ekperikpe Ekpo, Minister of State for Petroleum Resources (Gas), should expand the production of Liquified Petroleum Gas, used for cooking, instead of halting the export. His counterpart in the Ministry of Petroleum Resources, Heineken Lokpobiri, plans to raise daily petroleum production by one million for export.
Nigeria’s Federal and state governments can jointly nudge the private sector to invest in the country’s agriculture and agro-allied sector to cultivate more agricultural produce and as well as turn the commodities into industrial manufactures for export.
If, for instance, Southern Nigerians can turn agricultural crops into industrial raw materials for the pharmaceutical and textile industries, and Northern Nigerians can revive the hides & skins trade, for export, Nigeria can turn the pitiable foreign exchange table around.
Governor Lucky Aiyedatiwa of Ondo State has already given an undertaken that if he is re-elected in the November 2024 off-season gubernatorial election, he will promote agriculture and food security. He may just be able to motivate his constituents to supply cheaper food crops to Americans who are currently concerned about the high cost of foodstuffs.
To attract foreign students and their convertible currency to the Nigerian economy, as they used to do in the 1960s and 1970s, the Federal and state governments should invest in the quantum improvement of tertiary educational institutions.
An ancillary to that is to also improve the medical infrastructure to reverse the medical tourism that Nigerians make to other countries and attract patients from countries that hitherto provide medical treatment for Nigeria’s money-miss-road elite.
The revelation by Sule Abdulaziz, Chief Executive Officer of Transmission Company that “(Nigeria supplies) Togo, we supply Benin (Republic) and Niger (Republic)… they get power from Nigeria on a 24-hour basis and they are paying,” is enough motivation for Nigeria to expand the capacity of its electricity sector to be able to further expand supply to the western and central African markets.
The Federal, state, and local governments can agree to divert funds from Excess Crude Account, or from savings made from the removal of petrol subsidy, to invest in electricity, probably the most foundational infrastructure for the success of Nigeria’s industrialisation strategy.
(By the way, the argument by Minister of Power, Adebayo Adelabu, that increased funding from charging premium tariffs for Band A market of the electricity sector will lead to facility upgrades and expansion doesn’t seem to be adding up).
Dr. Jumoke Oduwole, incoming Minister of Industry, Trade and Investment, should join hands with Abubakar Atiku Bagudu, Minister of Budget and Economic Planning and Edun, and begin to think about how to urgently create conducive conditions to revive the comatose real sector of the Nigerian economy.
If all this works, all CBN Governor Cardoso needs to do is to keep looking for creative ways to devalue the naira further, which will be getting stronger, to make Nigeria’s farm produce and industrial manufactures affordable for consumers in foreign countries with stronger currencies.
But also, Finance Minister Edun and the National Salaries and Wages Commission must regularly review salaries and wages to reflect the cost of living that would rise after every devaluation of the Naira. After all, there is a law that mandates regular salary adjustments.
If well executed, this strategy should feed Edun’s ambition to optimize foreign remittances to Nigeria, conveniently pay for Nigeria’s imports, and provide jobs for Nigeria’s army of unemployed youths.