Oyetunji Abioye
Economists on Wednesday advised the
Federal Government and the Central Bank of Nigeria to review their
policies and introduce measures that would turn around the dwindling
fortunes of the nation’s economy.
They spoke against the backdrop of the
persistent fall of the naira against the dollar, with the local currency
exchanging for 375 against the greenback at the parallel market on
Wednesday; the imminent economic recession; and the spike in inflation
to 16.5 per cent in June.
The Chief Executive Officer, Economic
Associates, Dr. Ayo Teriba, who noted that the global fall in crude oil
prices had made the nation’s oil revenue to nosedive, said there was a
need for the Federal Government to seek foreign exchange from
alternatives sources in order to cover for the shortfall.
He said Nigeria and its economic
managers could not afford to fold their arms and allow the situation to
get worsened. Rather, he said efforts must be geared towards
implementing policies that would fight negative growth and inadequate
liquidity at the interbank market.
Teriba said, “There are a number of
things we can do as a country to boost our forex supply. Just the way
India did some years ago, we can tap Nigerians in the Diaspora to
contribute forex to save the situation at home. We can’t say we have
done all when we have not done this.
“Billions of dollar can be raised
through this. Saudi Arabia has just raised billions of dollars by
issuing an Initial Public Offering on government agencies. Nigeria can
raise billions of dollars in Foreign Direct Investment by issuing IPOs
on government monopolies in critical infrastructure like rail, power
transmission, oil and gas pipelines. There are a whole lot of things we
can do to save the economy.”
A professor of Economics at the Olabisi
Obabanjo University, Sherriffdeen Tella, who emphasised the need to stop
the speculative attack on the naira, said the Federal Government needed
to review its policies and boost local production.
He said, “All attempts must be made to
increase local production, especially food items, and reduce importation
of such. These, coupled with resistance to price hike, will keep prices
down as the economy picks up gradually from reflationary economic
policies and stable oil and electricity outputs.”
An economic analyst at Ecobank Nigeria,
Mr. Kunle Ezun, said there was the need to close the gap between the
exchange rates at the official and parallel markets.
He said the government must also address
the spike in inflation, negative GDP growth and naira depreciation
effectively and urgently.
Meanwhile, the naira tumbled further
against the dollar at the parallel market on Wednesday and closed at
375, down from 368 on Tuesday.
Foreign exchange dealers said the
lingering scarcity of forex at the interbank market was shifting dollar
demand to the black market.
The local currency had lingered between
346 and 348 at the parallel market before tumbling to over 360 this
week, following the total floating of the naira by the CBN on Friday.
The local currency, however, eased
slightly against the dollar at the official interbank market and closed
at 294.23 on Wednesday, up from 294.87 on Tuesday.
Dealers said the local currency was
stuck at 294.23 after just one transaction was carried out, with the
supply of dollars drying up and no intervention by the CBN, Reuters
reported.
Highlighting the state of the interbank
market, an economist at Exotix, Mr. Alan Cameron, said, “Recent FX
reforms have been enough to re-open the investment case for Nigeria, but
there is still some uncertainty about the functioning of the market.
“The absence of volatility at N283/$ was
interpreted as a sign that administrative controls were still in place;
it remains to be seen if those will be fully removed.”
According to some analysts, foreign
investors have welcomed the removal of currency controls by the CBN but
many are still steering clear of the Nigerian economy until it shows
signs of a concrete recovery.
“Most investors would like to see a more
liquid FX market before resuming purchases of local assets,” the Head
of Africa Strategy at Standard Chartered Bank, Samir Gadio, told
Reuters.
He, however, added, “Given the
significant discount of naira-settled futures, a number of offshore
financial institutions and hedge funds could be tempted to get involved
in the foreseeable future.”
The Chief Executive Officer, Cowry
Assets Management Limited, Mr. Johnson Chukwu, said the naira was
falling at the parallel market because demand had shifted there due to
lack of liquidity at the interbank market.
However, the National President,
Association of Bureau De Change Operators, Aminu Gwadabe, said the naira
was not sustainable at 375 to the dollar at the parallel market.
He described the demand as artificial,
saying, “I think the parallel market has been taken over by some forces.
Where is this demand coming from? I think this is not sustainable.”
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