• Tuesday, February 27, 2024
businessday logo


The Naira’s fickle flight: Short-term fixes and longer term measures to save the Naira

Foreign investors hit brakes on Nigeria over volatile naira

For Nigerians, the value of the naira is more than just an economic indicator; it’s a barometer of everyday life. Its recent depreciation has sparked public concern, prompting the question: What is the plan to stabilise the currency? While short-term measures are needed, proper stability hinges on long-term economic transformation.

Relevant federal government authorities are hard-pressed; as they seek short-term fixes, they also contend with informed and ignorant conversations on the streets and byways of Nigeria.

The Naira plunged 36% in the week heralding February. The Central Bank cracked down on misleading price reporting and allowed changes in the method for setting rates in the official forex market. It eased rules on international money transfers to capture billions of dollars in Diaspora remittances.

That move ignited speculations even in the national media that the Central Bank planned to seize funds in domiciliary accounts. Both the CBN and the Finance Minister immediately responded to the premise.

Relevant federal government authorities are hard-pressed; as they seek short-term fixes, they also contend with informed and ignorant conversations on the streets and byways of Nigeria.

Wale Edun, finance minister, stated: “There is no iota of truth in the claims of Punch Newspaper that the Federal Government plans to convert foreign exchange in depositors’ domiciliary accounts to naira. The publication of such falsehood at a time when the government is working to restore economic stability and confidence in the national currency is tantamount to economic sabotage.”

Ill-informed counsel by political players worsened the situation and gave wings to the speculation. An Ekiti-state politician urged the authorities to close domiciliary accounts. He claimed that the Dom accounts contributed to the worsening naira value. Many such assertions litter the public space.

An informed counsel suggests that Nigeria should invest in bonds from Europe to America. Buying a US treasury bill with a 30-year tenor can provide a bankable collateral that would unlock access to forex for Nigeria. It will earn us the needed trust for investors to bring in their investments and foreign exchange.

Central Bank interventions can offer temporary relief. Market-driven foreign exchange policies reflecting demand and supply could improve transparency and attract investment. Targeted interventions might be warranted to ease pressure on specific sectors, like essential imports. Managing inflation, the nemesis of currency stability requires tighter fiscal policies and controlling money supply growth.

However, lasting solutions lie in fostering sustainable economic growth. Boosting non-oil exports is crucial. This requires investing in agriculture, our historical strength, improved infrastructure, storage facilities, and farmer support.

Boosting agriculture today requires immediate action on security. Farmers in many places now avoid their farms because of the menace of bandits, kidnappers, and sundry malevolent fellows. The security response has been slow, and inadequate and does not foster trust.

Nigeria suffered years of sustained de-industrialisation. The environment has been disabled. It also meant failure to innovate by our industrialists. Nigeria has become a receptacle for foreign goods.

Revitalising manufacturing through policy incentives, access to finance, and enhanced power supply can unlock Nigeria’s industrial potential. Additionally, diversifying exports beyond oil and gas initiatives. Improving business efficiency by streamlining regulations and reducing bureaucracy will attract investment and encourage domestic production. Finally, investing in human capital through quality education by promoting sectors like Information Technology and creative industries can spread risk and generate valuable foreign exchange.

Long-term success demands addressing structural weaknesses. Tackling corruption, cancer-eroding investor confidence and resource allocation requires robust enforcement mechanisms, transparency and skills development will create a workforce equipped to drive the economy forward.

The success of these long-term strategies hinges on concrete details. The government’s National Export Development Plan (NEDP) outlines an ambitious roadmap for export diversification, but its implementation requires dedicated resources and focused execution. Similarly, the Nigeria Industrial Revolution Plan (NIRP) lays out targets for manufacturing growth, but attracting and retaining investors necessitates addressing infrastructural bottlenecks and policy inconsistencies.

Stabilising the naira is not a singular task; it demands a collective effort. The government, private sector, and civil society must collaborate to address short-term pressures and implement long-term reforms. Transparency, accountability, and data-driven decision-making are essential to ensure resources are effectively utilised and progress is measurable.

Values matter and show in the conduct of officials more than in their proclamations. The conduct of our government officials and their friends belie the facts of Nigeria’s dire economic conditions. Trust-destroying conduct includes insensitive and unjustifiable allocations of scarce funds to the National Assembly, federal and state governments for unproductive activities that do not regenerate funds.

The naira’s value reflects the nation’s economic health. While short-term measures can provide temporary relief, proper stability lies in diversifying the economy, fostering domestic production, and addressing structural weaknesses. Only then can the naira stand tall, symbolising a resilient and thriving Nigeria.