Olayemi Cardoso, governor of the Central Bank of Nigeria (CBN), says medical tourism and the growing number of Nigerians studying abroad are two major factors contributing to the devaluation of the naira.
Cardoso, who said this when he appeared before the House of Representatives, disclosed that Nigerians spent over $40 billion to access education and healthcare abroad in ten years, between 2010 and 2020.
The CBN governor told the lawmakers that mitigating a significant portion of the demand could have resulted in a considerably stronger naira today.
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Cardoso, while explaining that the Nigerian foreign exchange market was currently facing increased pressures, causing a continuous decline in the value of the naira, highlighted the growing trend of Nigerian students studying abroad, citing data from UNESCO’s Institute of Statistics and the World Bank.
“Looking at the demand side of the exchange rate, it’s important to note the growing number of Nigerian students studying abroad. According to UNESCO’s Institute of Statistics, the number of Nigerian students abroad increased from less than 15,000 in 1998 to over 71,000 in 2015. By 2018, this figure had reached 96,702 students, as per the World Bank”, he said.
He said another report projects the number of Nigerian students studying abroad to exceed 100,000 by 2022, adding that the UK’s Higher Education Statistic Agency noted a 64 percent increase in Nigerian students studying in the country, rising from 13,020 in the 2019/2020 academic session to 21,305 by the 2020/2021 session.
“Given this data, it’s crucial to highlight that between 2010 and 2020, foreign education expenses amounted to a substantial $28.65 billion, as per the CBN’s publicly available Balance of Payments Statistics. Similarly, medical treatment abroad has incurred around $11.01 billion in costs during the same period. Consequently, over the past decade, foreign exchange demand for education and healthcare has totaled nearly $40 billion. Notably, this amount surpasses the total current foreign exchange reserves of the CBN,” Cardoso said.
He further highlighted that the demand pressures on the foreign exchange market are further exacerbated by other factors, including personal travel allowances, which accounted for $58.7 billion from 2010 to 2020.
“Continuing on the topic of the demand for US dollars, Nigeria’s annual imports, which require dollars for payment, amounted to $16.65 billion in 1980. By 2014, the annual import expenditure had significantly surged to $67.05 billion, although it gradually decreased to $54.71 billion as of last year.
“Similarly, food imports escalated from $2.63 billion in 1980 to $14.84 billion in 2019. In 1980, more than 75 percent of the vehicles used in Nigeria were domestically produced by companies like Volkswagen in Lagos, Peugeot in Kaduna, and others. Presently, over 99 percent of the cars driven are imported, necessitating dollar payments”, he explained.
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“Similarly, in 1980, the majority of the clothing worn was sourced from Nigerian textile mills in Funtua, Asaba, Kano, Lagos, and various other towns and cities. Today, nearly all the clothing worn is made from imported fabrics. Given the substantial demand for education, healthcare, professional services, personal travel, and similar needs, the exchange rate is bound to face ongoing pressure”, he added.
Consequently, Cardoso emphasised that to bolster the inflow of dollars into the country, the economy must earn the dollars through exports, whether oil or non-oil or by attracting foreign investments.
He regretted that over the past 12 years, oil exports, constituting over 90 percent of foreign exchange earnings, have declined from $93.89 billion in 2011 to $31.4 billion in 2020.
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