Unfortunately, too many “economic experts” seem to have lost their sense of humanity and read off from economic text books written by foreign experts for foreign countries, of which they typically know little.
While in the short run, a devaluation may seem like the best idea, there are other measures that can be adopted to help shore up the currency, one of which is the repatriation of stolen funds which may run into several billions of dollars. In addition, stemming the hemorrhoids otherwise called “corruption” will also go a long way to curb the pressure on the Naira at the Forex market. Finally, the application of saved/repatriated funds into meaningful and economically viable projects, such as the refining of petroleum products, and the expansion of the revenue earning industries such as the solid minerals sector, will also help sustain the exchange rate.
An economy which is as import dependent as Nigeria’s must be protected against “market forces” in the Forex market, not unlike the Americans fiercely protect their agric sector in spite of preaching open markets and competition.
FINANCIAL analysts have urged the Central Bank of Nigeria (CBN) to yield to the calls for Naira devaluation as a response to the slump in the global oil market.
The experts, who spoke at a training for finance courrespondents and business editors organised by Sterling Bank in Lagos at the weekend, emphasised that the apex bank, in making policies on the exchange rates, should first understand that the exchange rate mechanism is more important than the rate itself.
To them, the currency should be devalued now when the required magnitude is still small and the fallout manageable as further delay might be too costly for the nation to bear.
According to France-based financial expert and media trainer, Jurgen Hecker, now that the price of oil is going down, it translates to current account deficit and serious drop in revenue.
According to him, a devaluation will make the currency more realistic, cause new industries to spring up, while diversification of the economy would take driver’s seat so that the country can export more, as its exports become cheaper.
The Managing Director, Financial Derivatives Limited Bismarck Rewane believes that it will be impossible for the local currency to firm up appropriately until certain bottlenecks like subsidy and leakages are removed by the current administration.
He advised that ‘it is better to amputate a decaying leg now that the tumor has not reached up to the knee than to delay and amputate the same leg when the tumor has crossed the knee.”And the worst is to get so confused that the wrong leg is mistakenly amputated” .
He argued that as long as the government is hesitant to remove subsidy on petroleum products, the heightened demand for dollars by the marketers, among others,, will continue to haunt the economy; stressing also that there should be a process that leads to determination of naira exchange rate rather than defending and fixing rates overnight.
He said that the devaluation at this stage of the economy is not about what “we want, but what needs to be done,” stressing that monetary and fiscal authorities have to understand and agree that the problem has reached advanced stage which requires optimal solution.
In Economics, Rewane added that economic agents make decisions and in each decision, something has to be given up.
His words: “If you are consuming butter when your income was high, you have to change to margarine when your income falls . If you ate ripe plantain before, you have to change to unripe plantain. You will move from cornflakes to yam, from three newspapers to one. We as individuals make these decisions every day. If we can make them at individual household levels every day, we have to make them at the national level.”
Source: Sun Newspaper