The Chief Executive Officer, Lead Capital Plc, Prince Abimbola Olashore, has advised Nigeria to work towards getting out of the present mono product trap by developing other potential sources of forex, having observed that due to imperfections and distortions within the Nigeria economy demand for forex in relative terms appears to be more than in those countries.
This was stated at the 2015 Annual Seminar/luncheon of the Finance Services Group (FSG) of the Lagos Chamber of Commerce and Industry with the theme “Current Issues in the Nigerian Financial Sector”, in Lagos.
He noted that the exchange rate management of Nigeria is similar to the policies of some countries such as South Africa, Brazil, India, amongst others, but that the policy changes are more frequent in Nigeria than in those countries, which is amplified by the narrow source of Nigeria’s foreign exchange (crude oil sales proceeds), and faster developing manufacturing sector due to the ability to manufacture for exports. He thus advised that government to be a participant rather than being a sole supplier.
His seminar presentation which centered on ‘Foreign Exchange Challenge in the Economy, highlighted issues in the Nigerian Economy to include the present structure of the forex market which is shaped by the historical source of government revenue other than taxes and the constitutional requirement for a federation account, and that the large chunk of government revenue is earned in dollars and not allocated monthly in the same currency especially given the high forex component of States and MDA’s expenditure. He also pointed out that the dollar balances that are been held in Nigeria have been rising, thus dollarizing the economy.
Taking a cursory look at the foreign exchange of countries like South Africa, China, Turkey, India, Brazil, South Korea, and Indonesia, he noted that emerging markets currency have depreciated against the dollar indicating a wider problem in the global economy and thus he came to the conclusion that the dollar was getting stronger and not the economies getting smaller.
He identified some of Nigeria’s sources of foreign exchange to include Oil proceeds, Foreign loans, export proceeds, portfolio inflows, Foreign Direct Investment, Foreign governments, NGOs, remittances from Nigerians in the diaspora, and income from tourists. In the same vein, he highlighted the utilization of these foreign exchange to include import bills settlement, domiciliary account, foreign debt service, government projects with forex components, asset acquisition, dollar dominated investment, school fees, and Bureau de Change.
Having identified them, he x-rayed that Nigeria is an import dependent economy stemming from the fact that 80% of the items inherent are either imported or have high import content, and as such the devaluation/depreciation will make import more expensive which gives birth to borrowing, lack of innovations/creativity, amongst others.
To this end, he canvassed that reserves be grown while imports are cut. His words: “To tackle the foreign exchange challenge, I will suggest that reserves be grown while imports are cut, money should flow into the capital market, a competitive exchange be welcomed, dollar loans be funded with dollar projects, and naira projects with naira, that CBN should be a participant in the autonomous market to influence the direction of rates, Nigerians shouldn’t view Made in Nigeria goods as inferior, and finally, tourism posture be made friendly because it is closely tied to the business.
He made a case for revenue diversification after pointing out how volatile the oil market is further posited that no immediate solution will help save the situation. “There’s no immediate solution but I know that change will come, but the change and adjustments will be very hard and painful.”
Still in a bid to tackle the issues in the society, the Managing Partner , Technology Advisors, Mr. Basil Udotai spoke on “Dealing with the challenge of cybercrime in the economy’. He observed that much crime had been noticed in the Nigerian financial system especially when it is tech- based such as the use of ATMs, internet banking and the likes. Having noted that the financial services sector is the most critical sector of any economy, he suggested that technological laws should be technology neutral and not technology specific, cyber laws be made generic in provisions and not particular. He stated that even though Nigerians for the first time now have statutory instrument criminalizing unauthorized online actions, a decentralized and distributed enforcement framework be introduced, alongside compliance issues.