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Uche Uwaleke, university don, posits Nigeria must produce goods and services, lower importation to grow the economy and shower up foreign exchange reserve

|  By Anayo Ezugwu  |  Mar 13, 2017 @ 01:00 GMT  |

IN order to end the economic challenges facing Nigeria, the federal government has been advised to strengthen domestic production of goods and services. Uche Uwaleke, head of banking and finance department, Nasarawa State University, said the import-dependent structure of the Nigerian economy has continued to deplete the nation’s foreign exchange reserves, resulting in inflation, low growth and increased unemployment.

Presenting a paper entitled: “Enhancing Domestic Production as a Panacea for Growth and Foreign Exchange Conservation,” at the 23rd Central Bank of Nigeria, CBN, seminar for finance correspondents and business editors in Sokoto, Uwaleke said the current economic difficulties in the country provides an opportunity for the federal government to look inward to encourage economic growth and development.

“In order to boost the economy, the current demand management which involves forex access restrictions of items that can be produced locally, should be contained. I am not saying that the policy should be kept forever, but we should sustain it until we get out of recession. If our reserves get to a comfort zone of about $32 billion, then we can begin to think of how to relax the policy.”

According to him, the CBN through its development finance function should identify certain goods that can be produced locally and provide incentives for indigenous manufacturers to be able to produce it. Uwaleke charged federal government to ensure that the proceeds of the recent Eurobond is judiciously utilised as investors are more concerned about the interest they would get on their investments more than what the investments was used for.

Uwaleke said the Nigerian Eurobond was oversubscribed despite downgrades by rating agencies because investors saw a better yield as opposed to what they would get in European markets. He said Nigeria was due to repay the $500 million Eurobond it raised in 2013 next year.

“I looked at the budget implementation report starting from 2013 up till now and for 2016, it’s only the first quarter reports of the budget implementation that are on the website of the budget office. I cannot place my finger on what was done with the Eurobond that was issued in 2013 which will have to repay next year. We can’t trace it. The $500 million we did was just meant to test the world market. But again we need to see what it was used for.”

He noted that the cost of the latest $1 billion Eurobond issued by the country was high. “If we didn’t have a reserve, this Eurobond outing wouldn’t have been a success because all those investors are looking at your reserves.”

Uwaleke urged the country to focus more on accumulating its reserves before deciding to fully float the currency. According to him, Nigeria needs a minimum of $32 billion in reserves which will be comfortably enough for seven months of imports before it can float the currency. He challenged the school of thought that says the CBN should allow the market determine the value of the naira, saying that the supply of forex was yet to be enough to leave the currency to market forces.

He charged the monetary authorities not to succumb to pressure saying Egypt which succumbed to pressure of free-float of its currency, has seen its currency depreciate more than envisaged. “If we don’t have this $32 billion, we shouldn’t be thinking of floating the currency. Nigeria needs a minimum of $32 billion to be regarded as comfortable and that is enough to finance seven months of funding. So if we don’t have this $32 billion, we shouldn’t be thinking of floating the currency.

“Egypt was advised not to float the currency until they got to $25 billion reserve but because Egypt was pressured and in a hurry to get $12 billion International Monetary Fund, IMF, loan they did the currency float much earlier and they have now seen the outcome. So when people say Nigeria should float, we should look at what happened elsewhere.”

Uwaleke said the country’s economy is gradually recovering but the effect of foreign exchange prevents the people from feeling the impact of the recovery.

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