There is no doubt that the Muhammadu Buhari administration’s resolve not to devalue the naira is the correct position to take in Nigeria’s circumstance. Since the downturn in the price of crude oil in the international market, Nigeria’s foreign exchange earnings and reserves have been adversely affected. Consequently, there have been calls for or against the devaluation of Naira, with each side of the divide providing reasons for its position.
In far away Nairobi, Kenya, President Muhammadu Buhari settled the issue. He told a group of Nigerians in that country, that his administration will not devalue the Naira. The President gave the informed reasons that nothing will be gained from devaluing Naira since Nigeria is not export-driven. He also stressed correctly that poor Nigerians will suffer more as devaluation will fuel inflation in the economy.
Currency devaluation is usually carried out to achieve some economic and social objectives. The ultimate ones are to make a country’s exports more price-attractive while making imports more expensive and thus, less attractive. Thus, trading partners are encouraged or influenced to buy more of the country’s export products and services while its inhabitants are discouraged from importation of foreign goods. In so doing, while foreign exchange earnings increase, they are also conserved. Thus, from both sides of the trading relationship, the country’s foreign reserves will trend upwards.
As it is well-known, Nigeria is a mono-product export country. Apart from crude oil, there is nothing to export to earn handsome foreign exchange. On the converse, the country is import-dependent and any attempt to further devalue the Naira will lead to massive importation of goods and depletion of foreign reserves perhaps, to a level that can hardly support further imports. Such a situation will automatically result in hyper-inflation and aggravate poverty, civil unrest and criminality across the country.
However, a mere decision not to devalue will not lead the country out of its present dire economic circumstances. As emphasized in basic economics, what makes an economy thrive is its level of productivity – both for internal use and exports. Based on this, the Nigerian government should urgently embark on actions that will reverse the current trend of a low level of production or productivity in the country.
Towards this end, there are quick wins accessible to government. For instance, government and its officials, together with leaders across board and the entire citizenry, should curb their appetite for non-essential imported goods and those that can be produced domestically. Another is to focus on and unleash productivity in agriculture, mining, manufacturing, tourism, information and communication technology, etc. For a re-incursion into agriculture especially, it must be remembered that agriculture was the mainstay of Nigeria’s economy prior the advent of crude oil.
It is still the hub of most economies as substantial industrial raw materials come therefrom. A re-enactment of the years of the groundnut pyramids and cotton in the North, cocoa in the West and Palm oil and kernel in the East, will portend growth for the economy. With modern technology and advanced processes, much value can be added to the products before exportation in order to attract handsome revenue. In addition, quick stimulation of activities in the small and medium scale enterprises sector of the economy is very essential.
Nigeria, with an estimated population of 170 million, has a substantial number in the youth category that are, either unemployed or under-employed. These are readily available for government’s deployment in order to activate and realize the productive potentials of the country. Utilised aright and along the paths that will assure comparative advantage, the country will be on its way out of its present precarious economic situation.
The case of providing and up-scaling infrastructure such as power, roads, etc is a sine-qua-non. This has been one of the greatest challenges the country has in taking advantage of its potentials. Without adequate and functional infrastructure, the economy will not operate at its optimum and expected productive results will be a mirage. Further, it is high time standards similar to, or better than, those in the countries from which Nigerians import their goods were set. Where the standards already exist, adequate quality control and monitoring are called for to ensure that products from Nigeria can compete favourably.
The need for operational efficiency in all public and private sector endeavours – a sure way to eliminate waste, be cost and price competitive is an urgent one. Making sufficient and affordable credit available to the real sector to catalyse the economy also needs to be emphasized. Of importance also is that specialized government institutions, such as Bank of Agriculture, Bank of Industry, Nigeria Export-Import Bank, Nigeria Export Promotion Council, Standards Organisation of Nigeria, etc, set up to positively impact the economy, must scale-up their acts for a quick turnaround of the economy. Finally, fiscal and monetary policies as well as their implementation frameworks, need to be fine-tuned towards fast-tracking the achievement of improved productivity and consequently, a stable and sustainable Naira exchange rate.