Running an Import-dependent Economy is a threat to any nation’s development. The rise in the exchange rate of other foreign currencies against the naira is a direct result of a country not being able to produce and export enough goods and services, which would have ordinarily served as a means of earning foreign exchange to match the local demand for dollars, which is the major currency for trade in the world.
A country’s export should be more than its import or at least be at par with the other. To better understand this, we just have to bring in the Principle of Demand and Supply.
The major foreign exchange earner for the country is through the sale of hydrocarbons such as crude oil and natural gas.
Let’s say the country brings in 100 dollars every day by selling crude oil and natural gas; and the people living in the country need about $300 to $400 for businesses like importation or other personal needs such as medical tourism, overseas school fees and so many other things; the central bank will try to limit the number of those being issued forex to those sectors they will classify as “extremely essential” and by so doing, will be overwhelmed by the sheer number of people requesting forex.
Because the Central Bank cannot give what it doesn’t have, those who desperately need Forex would be left with no other option than to resort to sourcing for it from the black market, through the bureau De change operators thereby driving the price up, causing a huge disparity between the central bank’s official rate and that of the Bureau De change operators.
Nigeria has a lot to do to arrest this situation to stop the further weakening of the naira against other currencies. The solution to this particular issue isn’t far-fetched.
✓ The government needs to as a matter of urgency, fix and build more refineries so that crude would be refined in Nigeria to meet local demand and also have surplus for export, thereby putting an end to the importation of refined petroleum products which would save the country huge foreign exchange.
✓Agriculture is another goldmine waiting to be explored fully in Nigeria owing to the fact that the country is endowed with fertile arable land and enough man power needed to drive this sector.
Take for instance a country like The Netherlands; it made 94.5 billion euros, equivalent to 110 billion U.S dollars in 2019 from agro export alone. That’s like seven times Nigeria’s national budget which the government would still have to resort to borrowing to fund the deficit.
✓ The power situation in the county is a critical issue begging for urgent attention because power happens to be a key component that drives industrialization. No country can get to its economic zenith with an abysmal power sector.
These few recommendations should be implemented if the country wishes to build a strong and virile nation with a thriving economy because, it will help ease the pressure on the Naira and save the nation’s currency from further devaluation.