Writer: EFOSA JUSTIN
Within the past 7 to 5 years, the Naira has experienced what can be termed a free fall. From about 340 naira to a dollar to over N1000 to a dollar.
This has been a source of worry to anyone who is connected to the naira either by means of citizenship or international business investment.
This downward trend of the naira has somehow gained sustenance despite efforts by the government through the apex bank, the CBN.
Over the years, several policies have been made to save the naira or bring stability to it but none of these policies have been able to produce the desired result.
One of the effects of the constant fall of the naira is the negative trend in the nation’s GDP and foreign reserves.
This is to mention just a few among many of the negative effects of the fall of the naira.
However, as this is an issue that affects not just the government but also the general populace, many experts have propounded theories, planned roadmaps, and given their views on how the naira can be saved.
Here are 10 experts’ views on methods that can be adopted with the objective of saving the naira.
1. Dr. Kayode Farinto said the Impact of naira deregulation will lead to the rapid fall of the naira as the economy is not strong enough to gather any profit in a deregulated foreign exchange market.
As an import-dependent country with extremely low forex earnings, an increased demand for forex will cause the naira to weaken even more.
2. Dr. Ndunuisi Ekekwe, Chairman of FASMICRO Group said until there is an asymmetric balance in the demand and supply of the USD for willing buyers and willing sellers, the equilibrium point will keep shifting and will bury any chance of stabilization for the naira.
3. Dr. Sam Nzekwe, a financial expert has also suggested that the Government should diversify the export base, curb unbridled imports, and focus on policies that will make more dollars available for buyers by strengthening Nigeria’s industrialization policies as many items for which dollar allocation has been banned are still being imported.
4. Dr. Emmanuel Ozigi opined that the exchange rate floating policy needs an urgent review as an unregulated exchange rate would cripple the economy. “You cannot have a free-for-all policy where there are no regulations because nobody thrives on a free-market policy where everybody determines, or the market forces determine.
He has also called for the reduction of the dominance of the dollar in the Nigerian economy.
5. In 2021, Dr. Biodun Adedipe, the Chief Executive Officer of Adedipe and Associates Consulting firm, shared in an interview that the upward movement of a country’s foreign reserve or assets goes a long way in determining the value of the country’s currency. Adding that an increase in Nigeria’s foreign reserve will help sustain an increase in the value of the naira in the international market.
6. Professor Uche Uwaleke, a Professor of Capital Markets, is of the view that the Central Bank should fight inflation by ensuring the availability of petroleum products as it is the country’s main source of foreign exchange. This, he suggests can be achieved by decentralizing refining, privatization of government-owned refineries, and encouraging modular refineries in the country. He believes this will reduce the huge foreign exchange spent on fuel imports.
7. Mr Femi Onakanren, an Economic and Policy and Technology Solutions Specialist has said that the rate or the status of the naira to the dollar is not the problem. “Equating the naira to the dollar is not the solution to the falling naira”, he said in a recent interview. He believes the main problems are a series of issues that have contributed to bringing the economy to its current standpoint.
Mr. Onakanren mentioned the outstanding payments of forward contracts cause a disparity in forex which becomes the responsibility of the government to pay up.
Another issue that contributes to the downward trend of the economy is budget deficit accumulation which pushes the government to either borrow more money or print more cash which either increases the debt servicing and creates depreciation by increasing demand for foreign currency against the naira or causing devaluation because there will be too much cash in circulation due to printing of more naira notes.
The expert economist has suggested that the solution will be to increase exports to increase foreign exchange and increase confidence in the market by paying off debt and reducing the demand for the dollar in the market.
8. Economics expert, Professor Leo Ukpong, stated the devaluation of the naira is owed to the security challenge in the country as it drives away foreign investors.
He said the issues facing the naira may be multifaceted, it can however be narrowed down to a few things amongst which is the uncertainty caused by militants, bandits, and insurgents. He also pointed out that the low level of manufacturing in the country which makes the country largely dependent on importation contributes to the depreciation of the naira.
He concluded that until these factors are addressed, the naira will continue to plummet.
9. Mr. Johnson Chukwu has suggested that to prevent the depreciation of the naira, the government must create a balance between trade and import.
He explained that the reason for the fall of the naira is due to the exit of foreign investors from the Nigerian market and the negative balance of trade which is a result of a higher import than export rate.
The Economist advised that while Nigerians can try to protect their wealth by investing in other foreign currencies, the government should focus on improving our infrastructural supply to reduce the cost of doing business and production in the economy.
He added that the government should ensure that the quality of our finished products is up to international standards so they can be marketable in other parts of the world and thereby increase our export margin.
10. Mr. Kazeem Bello, a development economist, gave his view suggesting that the government must assist in bailing out the CBN in the short run by finding foreign exchange inflows into the market to prevent the continuous fall of the naira.
He also opined that it is also important to address the deficiency in forex supply and unify the exchange rates.
These are some of the circumventing views about the naira from different economists. Many of them have blamed the inflation on the devaluation of the naira and in a chain-like manner have blamed the devaluation of the naira on the drop in foreign reserves of the country.
The disparity between import and export activities is also a matter of concern in the discourse as well as foreign investments. This has continuously caused constant inflation, daily reduced the purchasing power of the common man and dropping the value of the naira exchange rate.
