Worried by the current focus of foreign exchange demand management by the Federal Government through the Central Bank of Nigeria (CBN), an analyst in the financial services sector have charged the government on expansion of sources of forex supply.
According to the Central Bank, Nigeria’s current monthly import bill is about $4billion while earnings are less than $1billion.
“it then means that if we limit ourselves to the current sources of inflow, which is principally crude oil sales, the price of crude oil in the international market must rise from the current level of about $30 per barrel to about $120 per barrel before we can balance our international trade”, Johnson Chukwu, managing director, Cowry Asset Management limited said.
Consequently, he sees Nigeria to be in need a cocktail of policies which will include exchange rate adjustment, creating windows of investment for long-term funds through concession of commercially viable infrastructure, and full deregulation of the downstream petroleum industry sector.
He also saw the need for stimulating investment in sectors where Nigeria has comparative advantage, as well as investing heavily in social infrastructure such as health, education, security.
Speaking on ‘Policy options to Nigeria’s Economic Crises’ at the Finance Correspondents Association (FICAN) Chuwku said it is such holistic approach to economic management that will change the structure on Nigerian economy and wean it from dependence on Oil for export earnings.
“The concerns of the government have been that these routes will inflict pains on the citizens; unfortunately, there is not easy route out. We however believe that it is better for the citizens to take this pain once and have the economy restructured so that we will not be exposed to another crude oil crises as we suffered in the 1980s, 1990s, 2008 and 2015/16”, he said.
A look at the movement in exchange rate of other Oil dependent economies indicate that most of them have allowed their currency to adjust to the strength of their export earnings apart from Venezuela and Egypt.
According to him, one of the most commented economic policies of the current administration is its decision to continue with a fixed exchange rate despite the precipitous drop in foreign exchange earnings as a result of the decline in crude oil prices. While the Exchange rate policy is considered to be under the purview of the Monetary Authorities, the interventions of the President on his Policy choice as it relates to the exchange rate has made policy call on this issue by the Monetary Authorities a complicated one.
”We believe that irrespective of the much trumpeted independence of the Central Bank, the Governor and members of the Monetary Policy Committee are not likely to take a decision on the exchange rate that will be contrary to the President’s position without first getting him to reverse his position”, he said.
HOPE MOSES-ASHIKE
