Sir: Not long ago, a respected foreign economic journal reported activities at the Lagos harbor. Its correspondent observed the myriads of vessels with merchandize of all descriptions, but to the reporter’s utter consternation, as the ships offloaded they left empty. This story depicts the import-dependent, non-productive economy Nigeria is. Except for the oil terminals where ships laden with oil leave the country’s shores; there are hardly other significant commodities or finished goods for export. And this is the bane of the Nigerian economy. The economy is at the mercy of the global oil market and the politics associated thereof.
This mono- product dependency has done much havoc to the economy.
Without the oil boom, perhaps by now cocoa, groundnut and oil palm processing factories would have been dotting the landscape. But now we are net importers of these products we were once notable producers and exporters. As oil prices drop, all facets of the economy feel the pinch. The Naira has plummeted and the reason is not far-fetched: we are short of foreign exchange as cash inflows have declined by over 75 per cent. The direct consequence is Naira’s relative weakness to the dollar and other strong currencies.
In the face of this apparent weakness of the Naira compared to dollar, the strategic economic decision will be devaluation. Experts have argued the pros and cons of devaluation and the government has its trite, unambiguous position; and that is, it does not fall for the idea of devaluation. At face value the government’s stand is a populist, patriotic stand. All the arguments considered, there is no alternative to devaluation given the present economic situation. The best way to handle the Naira is to allow market forces to determine its value; while the government concentrates on measures that prevent dumping of non essential imported goods, unnecessary foreign trips etc. Fixing the value at N199 per dollar is unrealistic and allowing it to float on its own is outrageous, just as its present black market value of N345 to the Dollar shows.
Genuine Dollar users can hardly obtain their requirements at NI99; and if they obtain their needs at N345 in the black market production costs will go up and a cost that the consumer must pay for. The result will be hyper-inflation. To keep industries afloat and make their cost pains minimal, the Naira’s value must be determined through a consensus amongst government, the CBN and the private sector. Such a forum will from time to time determine the Naira’s value as dictated by economic indices. It will make economic sense to make such a guided value gauging of the Naira. Black market fixations amount to fraud. In order to save industries, make production costs reasonable and avoid inflation; the Naira must be handled carefully or else it will be an economic catastrophe.