To stem the steady fall of the naira against the dollar, the Federal Government has been advised to as a matter of urgency put an end to the festering crude oil theft, boost oil production and put in place necessary measures to boost local production and exportation of other goods.
Some economists told our correspondent in an interview on Saturday that these were needed to boost the country’s foreign exchange earnings and bridge the supply deficit.
The Association of Chambers of Commerce, Industry, Mines and Agriculture however warned that if nothing was done urgently, the naira might fall to about N700 to a dollar.
Manufacturers, business owners and many Nigerians have expressed deep worries over the value of the naira, which exchanged for as high as N590 in the parallel market a few days ago. While the official rate stood at N416.23, findings from different sources on Saturday evening showed that the naira had fallen to an unprecedented N600 to a dollar.
Coupled with the 15.7 per cent inflation rate, the lingering forex crisis has led to a considerable increase in the prices of goods in the country.
The MD/CEO, Cowry Asset Management, Mr Johnson Chukwu, said naira had continued to suffer a free fall because of weak foreign exchange earnings, due partly to the low crude oil production, crude oil theft and low export of goods.
He said, “It’s all about how much you spend on importation compared to how much you earn from exportation. We are not producing enough so we don’t have enough resources to support the naira.
“The immediate solution is to stop crude oil theft so we can make more revenue, and the long term solution would be to diversify our economy so that we can produce more exportable commodities or produce more of what we consume to limit our importation.”
He said the Central Bank of Nigeria’s interventions, like the closure of Abokifx and ban on the sale of forex to Bureau De Change, could not bring down the price because the current price was a product of demand and supply.
Also, the President, National Association of Chambers of Commerce, Industry, Mines and Agriculture, Ide Udeagbala, said critical infrastructure like power should be fixed to boost local production of goods, both for local consumption and export.
He said, “The exchange rate could get to between N600 and N700 to a dollar with the way it’s going, as long as we are not exporting and we import almost everything. However, how do we talk about production when there is no electricity? The national grid collapsed twice two weeks ago and people had to buy diesel at N700.
“So, the solution is that we must produce enough for export to earn forex. Crude oil theft is also an issue. If we are expected to produce two million barrels per day and today we are at 1.3 million bpd, is it difficult to know why we are here?
Also, the Chief Executive Officer, Centre for the Promotion of Private Enterprise, Dr Muda Yusuf, said apart from addressing crude oil theft and boosting production, government should consider a flexible exchange rate policy regime, different from devaluation.
He stated, “This model would enhance liquidity in the foreign exchange market, reduce uncertainty in the forex market and enhance investors’ confidence. Also, it is a more transparent mechanism for forex allocation, it minimises discretion in the allocation of forex and reduces opportunities for round-tripping and other sharp practices.”