Financial experts are emphasizing that the Naira’s strength can only be bolstered through a rapid increase in productivity. This concern arises as Nigerians express dismay over the continuous depreciation of the Naira, despite efforts by the Central Bank of Nigeria (CBN) to fortify the currency through monetary policies.
According to a report by the News Agency of Nigeria (NAN), the Naira was exchanged at N774 to the dollar at the official CBN window on Friday, while it was valued at over N900 to the dollar in the parallel market.
Okechukwu Unegbu, a seasoned financial expert and former president of the Chartered Institute of Bankers of Nigeria (CIBN), asserts that the Naira is facing a dire situation and necessitates substantial commitment from the government to rescue it. Unegbu emphasizes that the declining crude oil market and unfavorable performance of Bonny Light in the global market have limited room for maneuver, primarily because the Naira’s value and the nation’s productivity aren’t aligned.
Unegbu states, “No economic theory can alter this situation. The only viable approach to rectify balance of payments deficits is by augmenting productivity.”
Uche Uwaleke, a Professor of Capital Market at Nasarawa State University, Keffi, raises concerns about the insufficient economic foundation to support a flexible Naira exchange rate, particularly regarding foreign exchange sources. Uwaleke, who also directs the Institute of Capital Market Studies at the university, proposes that the move to unify exchange rates, as President Bola Tinubu has done, should occur gradually rather than abruptly. He stresses that reform success is often contingent on a phased and sequenced implementation to mitigate unintended consequences.
Uwaleke points to the disconcerting second-quarter real Gross Domestic Product (GDP) performance, highlighting that growth stemmed predominantly from the non-oil sector. The oil sector faced setbacks due to diminished crude oil production. Within the non-oil sector, the Services segment, particularly telecommunications, trade, and financial services, facilitated growth.
However, Uwaleke voices reservations about this growth pattern, which heavily favors the services sector. He contends that such a skew is detrimental to a developing economy like Nigeria’s. He further notes that the seemingly inclusive economic growth disguises escalating unemployment and poverty levels, masked to some extent by the new methodology employed by the National Bureau of Statistics (NBS).
Uwaleke advocates for an economic reset that prioritizes technology-driven advancements in the productive industries, such as manufacturing and agriculture. This shift, he believes, will contribute to a more balanced and sustainable economic structure.
