by Dr. Israel Ovirih
Gradually, and just before you could blink an eye, the exchange rate of one US dollar inched to a thousand Naira, further widening the I&E (importers and exporters) window and the black-market rate to over 219 Nigerian Naira, even with the celebrated unification of the official and parallel market rates. What a dilemma!
The question on everyone’s lips is, “How did we suddenly get here, and can we get the new Nigerian leadership to stop this drift?”
Excitedly, President Bola Tinubu appears to know his onions by virtue of the economic team he has put together thus far, coupled with the current global partnerships and alliances, which he has been making efforts to rally, build, and lock down.
To be truth, crude oil inflow remains, by far, the largest source of foreign exchange in Nigeria, with over $45.6 billion inflow in 2022 alone. Nigeria seems helpless since we are not in a position to determine the global price per barrel of oil. Neither can we control our daily nor annual production volume due to a number of factors, including investment dysfunctionality, corruption at high places, and ‘open-dential’ stealing from our existing daily production.
We may be smart to ramp up production and reduce crude oil stealing if and only if we remove the present impediments to additional investments from the producing companies and stop crude oil stealing. With President Tinubu’s commitment, this task is not as herculean as it may otherwise appear. Who says we cannot achieve 3.0 million barrels per day? God punish the devil!—as we jocularly say in Nigeria.
Thinking aloud, how quickly can the government and the Central Bank of Nigeria (CBN), as well as other fiscal authorities, incentivize investors and International Oil Companies (IOCs) in this sector? Again, how quickly can they persuade all manners of Nigerians, both at home and in the diaspora, to be more patriotic by increasing diasporan remittances that bring back the’stolen dollars’? Amusing as it may sound, the President may need to personally participate in all forms of town hall meetings, locally and abroad, to get funds repatriated and encourage diasporan inflows!
Foreign portfolio investments must be doubled in the 2023–24 fiscal year. Who says ‘hot monies’ cannot be permanent monies, or better put, become ‘cold monies’, if the deals are right and incentivized under a more stable macro-economic environment? Let us remember that the more returns our capital market can deliver with the on-going reforms, the greater the likelihood of higher inflows from portfolio investors who will see our market as an Eldorado. Again, we must guarantee a stable exchange rate to ensure easy repatriation of margins and profits being made by foreign investors and all the trapped funds remitted by foreign airlines to their home countries.
As the days go by, President Tinubu is proving that he has the magic wand for foreign direct investment (FDI), for instance, as demonstrated through the various investment pledges and successes made recently, during and after his shuttle economic diplomacy and engagements at the G20 summit and the United Nations General Assembly (UNGA). We all know that Nigeria may be able to achieve over $10.0 billion annually in Tinubu’s first term in office if we make Nigeria a safe haven for all, if we are able to banish kidnapping and banditry to the past at all costs, if we introduce a more robust security architecture nationally, if we can guarantee a stable macro-economic environment, and if we tune up the law enforcement and judicial administration, among others. Obviously, these are key to attracting permanent investments from foreign corporations and multinationals.
We must not also treat our present non-oil exporters and potential exporters lightly. We must apportion the right resources, infrastructure, and funding to grow our non-oil exports since that sector is a major source of foreign exchange earnings for the country. In 2022 alone, non-oil exporters delivered over $4.8 billion into the nation’s FX basket, truly helping to stabilize official foreign exchange inflows. Expectedly, the size of non-export earnings should not be less than $20.0 billion annually under the new national government.
As part of the intentional strategy of the new government, the President and the economic team must, as a matter of national policy, hold half-yearly retreats with the crop of entrepreneurs and private sector leaders who are focused purely on exports. The Tinubu administration, through its inter-ministerial forum, must indeed treat exporters as kings and provide them with the right conducive environment, duty-free inputs, and opportunities for raw material importation, especially for capital plants and equipment. Robust export grants and other creative incentives should also be made available to the sector to shore up the value of the naira in the coming years.
The various policies and circulars of the CBN must be harmonized and seen to promote continuous inflows of foreign exchange into the coffers of the country. The new CBN leadership should consider creating an FX think tank consisting of exporters, members of the Manufacturers Association of Nigeria (MAN), the Nigerian Association of Chambers of Commerce, Industry, Mines, and Agriculture (NACCIMA), and policy experts to help mold the right framework that will guarantee FX inflows, sustainably, from the non-oil export sector.
We watched helplessly how the last ten years became an era for the bastardization of various intervention programs of the CBN. The new president must stir the security apparatus of the Federal Government to independently watch the FX market in order to provide greater transparency in the inflow and outflow and indeed in the role of the money deposit banks, which to all intents and purposes has been calamitous.
In conclusion, stemming the downslide of the economy remains not just the responsibility of the President, the economic team, and the CBN alone, but of all Nigerians if we must have a stable naira and one that is a source of pride for all.
Dr. Israel Ovirih, an Investment Banker, is the convener of the Africa Critical Minerals Roundtable (ACMR)