CEO of the Nigeria Economic Summit Group (NESG), Mr. Laoye Jaiyeola, has classified saving in Naira as a futile exercise because the currency’s value has been fully decimated by inflation.
This was said by Jaiyeola at the unveiling of the NESG 2022 Macroeconomic Outlook Report in Abuja on Tuesday.
To illustrate his point, he used the example of investing in Treasury Bills, stating that, with inflation currently at 15%, the moment an investor buys Nigeria’s Treasury Bills (TBs), inflation and other things eat away at the expected profit or interest.
He said; “Why should you tell anybody in Nigeria to store his money in Naira when your interest rate on Naira in some places is even lower than the interest rate of some foreign currency?
“If you put your money in Treasury Bills now in one-year treasury bill, I’m not sure you are going to get up to 5 per cent per annum, inflation is 15 percent. Effectively from the day you save your money you, have lost your money, that explains why people will still go and buy money and keep it in dollars because Naira is significantly becoming something that is not of store value.
On his part, the International Monetary Fund’s (IMF) Nigeria Country Representative, Mr. Ari Aisen, called on the Federal Government to take full charge of its reform programmes.
Aisen, who spoke against the backdrop of recent policy inconsistencies on whether or not petrol subsidy should be removed, called on the government to “be in charge of reforms instead of being reactive”. He urged the government not to carry out reforms when it is convenient.
The NESG report noted that “the challenge to the poor forex supply in Nigeria is mainly attributable to the lack of diversification of forex sources, with colossal dependence on crude oil export proceeds and, more recently, foreign borrowings”.
On the need to boost foreign exchange availability, the NESG is proposing, leveraging the African Continental Free Trade Area (AfCFTA) and ensuring effective border control; removing capital controls and encouraging the inflow of stable investments; prioritizing non-oil forex sources; enhancing the quality of import substitutes and the fixing of local refineries and constructing of new ones. With regards to ensuring appropriate pricing of foreign exchange, the NESG is recommending a clear forex policy to instill investors’ confidence and the need to determine the fair value of the Naira.
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Addressing the issue of fuel subsidy, the NESG 2022 Macroeconomic Report notes that fuel subsidy was “conceived initially as a short-term support tool, has endured over time, thereby becoming a threat to fiscal sustainability”.
The removal of subsidies on petrol, the report says “will come at a cost. Tough reforms are costly and the cost of inactions is also enormous”.
Another challenge facing forex management in Nigeria, the report states, “is the frequent intervention of the CBN at the forex market, which exerts intense pressure on the country’s external reserves. Faced with the continued dwindling of the external reserves, the apex bank resorted to exchange rate devaluation (three episodes were witnessed in 2020) and forex rationing among end-users”.
These challenges send wrong signals to prospective investors who are more concerned about the safety of their investments (particularly forex repatriation at maturity of investments, in addition to returns)”.
Meanwhile, NESG, yesterday, warned that the political manipulations of 2022, might relegate focus on the economy and lead to the stagnation of the nation’s economic recovery.
Speaking at the Report launch, NESG Chairman, Asue Ighodalo, noted that the distractions would likely have the effect of amplifying the challenges experienced in 2021 if the government does not immediately move to stem the tide by implementing critical reforms.
According to him, the policies that directly impact the welfare of citizens and the performance, sustainability and job-creating potentials of businesses, in the short term, must be at the fore of government’s policies and actions in 2022.
The chairman also noted that the research department of NESG, working with other panels of economists, produces an Outlook Report that reviews the macroeconomic status of the country in the previous year, noting that the recent outlook provides an overview for the new year and suggests reform and policy recommendations geared at improving the nation’s macroeconomic climate; creating an enabling environment and catalysing inclusive growth.
“Election-related distractions will likely have the effect of amplifying the challenges experienced in 2021 if the government does not immediately move to stem the tide by implementing critical reforms.
Ojelabi, the publisher of Freelanews, is an award winning and professionally trained mass communicator, who writes ruthlessly about pop culture, religion, politics and entertainment.
