Lest we relapse

….also published in Daily Trust

In an attempt to check the hitherto persistently dwindling value of the Naira and curb the unprecedented foreign exchange scarcity-induced inflation in Nigeria, the Central Bank of Nigeria (CBN) has recently relaxed access to Forex. As expected, many Nigerians breathed a sigh of relief hoping that the inflation would soon begin to ease up.

 Central Bank of Nigeria (CBN)

The Buhari administration had tightened access to the CBN-sourced Forex as a strategy aimed at weaning the country off its practically total dependence on imported goods that obviously require much stronger Forex to import. The strategy was also intended to facilitate the creation of a viable environment for local economic enterprises to not only thrive, but to actually dominate the local market share and indeed flourish well enough to compete elsewhere as well, in terms of the quality, attractiveness and prices of their  products and services.

However, against the backdrop of the virtual absence of alternative sources of Forex in the country, on the one hand, and inadequate supplies of local alternative products to fill the looming supply-demand gap, on the other, the need for foreign products has ever since then persisted, which resulted in high demand for Forex that, in turn, triggered free fall in the value of the Naira and, consequently, unchecked rise in the cost of living in the country.

Nevertheless, though the ensuing and already predicted and apparently short-term inflation-induced economic hardship has been quite agonizing, the steadily growing enthusiasm and initiatives by a growing number of individuals and firms to leverage the abundant but largely abandoned local potential to fill the impending supply-demand gap and provide local alternatives, represent light at end of the tunnel. For instance, there is noticeable and potentially phenomenal growth in industrial-scale agricultural enterprises, which if sustained, will grow massive enough to not only dominate the local market share, but will, in fact, enable Nigerian farmers secure appropriate market share in international markets as well.

There are also equally steadily growing activities in other sectors of the economy, e.g. service delivery and production of sundry goods and commodities, which are increasingly gaining further market share thanks to the dwindling availability of imported goods and their exorbitant prices; a development that also encourages entrepreneurship in the society and facilitates jobs creation.

Also, despite the apparent lack of confidence in the quality of locally manufactured and processed products compared to the imported ones, this evolving trend would certainly inspire local manufacturers and service providers to imbibe the culture of commitment to the highest quality standards in their production processes, and excellence is their service delivery. Meanwhile, relevant quality standards compliance and enforcement agencies should also be reformed to discharge their duties effectively.

Obviously, though this is still a gradually evolving change process in the society, if sustained, it will eventually revolutionize and transform the country’s economy into a modern and vibrant economy that generates real and sustainable prosperity for all. 

However, now that the federal government appears to be altering the Forex supply policy that basically brought about the current increasingly favourable circumstances for real economic recovery and sustainable economic growth, and even though the Naira has been consequently appreciating, it remains to be seen whether the prices in the country would come down accordingly. After all, it’s still not clear whether this policy alteration is tactical aimed at addressing some urgent and previously unforeseen implications, or strategic signaling the beginning of the gradual reversion to the previous counter-productive Forex policy and its corruption-ridden supply system.

Now, pending crystallization of the policy alteration and its short and long-term impacts on the economy, the Central Bank of Nigeria (CBN) should put in place effective mechanisms to avert reversion to the era of uncontrollable fraudulent activities in Forex trading industry e.g. speculation, renting-seeking, round-tripping, bulk cash smuggling and other corrupt practices that many unscrupulous Forex recipients, exchange agents and speculators had perpetrated with active connivance of their accomplices in the CBN, banks and some law enforcement agents who used to facilitate frequent smuggling of millions of CBN-sourced Forex out of the country via particularly Mallam Aminu Kano International Airport, Kano and Murtala Mohammad International Airport, Lagos.

Incidentally, though these practices never stopped even after the introduction of the tightened Forex supply policy by the Buhari administration, yet, as the gradually evolving above- highlighted circumstances take root, such fraudulent practices were already decreasing and were, in fact, bound to fizzle out automatically.

It’s indeed worrisome that, as the country’s foreign reserve gradually goes up thanks to the gradual appreciation of crude oil prices in international markets, the federal government appears unable to come up with a balanced Forex policy that can address the challenges of inflation and concurrently maintain the strategic need for investing its funds in the provision and improvement of critical infrastructure in the country for sustainable economic development.