September 22, (THEWILL) – The Nigerian economy is facing a massive foreign exchange crisis and the rate of depreciation of the naira has sparked serious concern among citizens.
The debates have raised voices with many calling for the sack of Godwin Emefiele, Governor of the Central Bank of Nigeria (CBN).
However, in a stout defence of the CBN Governor, a group of development economists, the North-South Economists’ Forum (NSEF), has absolved Emefiele, from the depreciating value of the naira in the forex market.
According to NSEF, two factors are responsible for the weak naira – low receipts from crude oil sales, and a highly import-dependent economy.
The Forum in a press statement signed by its Chairman, Malam Ahmed Abdulkadir and Secretary, Dr. Chima Eboh, said, Nigeria has witnessed two recessions, the first between 2015-2017 which was due to the crash in global price of crude oil, and the other, between 2019 and 2020 (induced by the Covid-19 pandemic).
NSEF, said none of the two incidents are traced to the CBN.
Making clarifications on how low receipts from oil and a highly import dependent economy weakened the naira, the Forum said, “Nigeria earns a huge chunk of her foreign exchange from the sale of crude oil but much of that is spent on the importation of refined petroleum products and other basic amenities most which could have been produced in the country.
“How is it the fault of any CBN Governor or the CBN itself that the country cannot refine her crude for local consumption at least? Is CBN in charge of the refineries? Does CBN sell our crude oil? Is it the fault of CBN that Nigerians import rice, cereals, toothpick, tomato paste, beans, wheat and other basic products and agriculture produce all of which can easily be produced in the country?”
NSEF recalls that in 2018, Nigeria spent N13.1 trillion ($36.5 billion) on imports; in 2019, the figure climbed to N16.95 trillion ($47 billion). A chunky $28.7 billion was spent on invisibles, that is money spent on business travels, financial services, medical tourism, among others.
Explaining the situation, the Forum laments, “No nation on earth operates like this – living off exotic products at the expense of its primary sector. None of these can be linked to CBN. When people fly to America, Asia and Europe just for medical check-up; when public office holders make overseas trips their pastime and spend huge sums of forex on each of these trips, we should not blame CBN.
“Nigeria’s foreign trade is in deficit and has always been and this will continue for as long as Nigerians continue to prefer imported goods and services, neglect the manufacturing sector, and continue to engage in sharp practices even with the little forex available.”
In the raging debates, NSEF said, “Some economists and financial experts have argued for a realistic re-pricing of the naira, we strongly believe that this is not a sustainable cure for as long as the country continues to finance importation of refined petroleum products from the forex she earns from crude oil.”
Noting that a huge chunk of forex is expended on the importation of petrol and other refined petroleum products, NSEF said it is not the duty of Emefiele or CBN to redress this anomaly of spending huge forex to import petroleum products that could easily have been produced at home if the refineries were functional.
“Those who are calling for the head of Emefiele should look elsewhere. But we know that this recent resurgence in attacks on the CBN Governor was because Emefiele has taken the bold stance of suspending the sale of forex to Bureau de Change (BDC) operators, most of whom have consistently violated the terms and rules of engagement.
“This recourse to blackmail clearly portrays some Nigerians as working against the interest of the nation. Rather than squarely address the allegation that some BDCs were supplying terrorists forex to procure arms and ammunition to attack the nation and kill innocent Nigerians, they have recruited some uninformed and vulnerable voices to chant ‘Emefiele must go.’ We make bold to say that even if Emefiele is replaced by the best Central Banker in the world without addressing issues of local refining of crude oil, local production and manufacturing, hoarding of forex by politicians and other public office holders, and the general corruption in the system, the naira will continue to struggle in the forex market”, it added.
The Forum recalls the statement of Emefiele at his post-MPC meeting address last year where he gave insight into the parallel market, describing it as a shallow market that should not be used to determine the real value of the naira.
Emefiele had said: “I heard some analysts talking about the parallel market. I want to say that it is unfortunate and really unfair that even analysts who are supposed to know will play with numbers and begin to determine the exchange rate of our currency using a parallel market rate.
“For the information of everybody, the parallel market as far as we know it and the data that we have, is a shallow market in Nigeria with no more than 5% of market share. Parallel market, and quote me, is a tainted market in Nigeria, where people who desire to deal in illegal foreign exchange transactions including sourcing of FX cash for purposes of offering bribes, corruption, that is where they deal. This is very unfortunate.”
It however said that rather than criticisms, Nigerians should commend Emefiele because the naira could have been worse but for the safety measures he applied including banning the funding of the importation of over 40 items.
“Rather than blame Emefiele, Nigerians should direct their anger at those who frittered away the nation’s foreign reserve during the period when crude oil was selling for over $100 per barrel. We recall that experts including then Minister of Finance, Dr. Ngozi Okonjo-Iweala, suggested that the nation saves money for tomorrow through a Sovereign Wealth Fund, SWF, but the governors at that time vehemently opposed it”, the Forum added.
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