The federal government has been advised to implement policies that would help strengthen domestic production of goods and services.
An economic analyst and Head of Banking and Finance Department at the Nasarawa State University, Dr. Uche Uwaleke, said this while delivering a paper at a seminar organised by the Central Bank of Nigeria for financial journalists in Sokoto tuesday. He pointed out that the import-dependent structure of the Nigerian economy had led to the depletion the nation’s foreign exchange reserves, fuelled inflation, depressed growth and created unemployment.
The present situation of the Nigerian economy, he added, provides an opportunity to look inward in a bid to trigger 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,” he added.
He urged the CBN, through its development finance function, to identify certain goods that can be produced locally and provide incentives for SMEs to be able to produce locally.
In addition, Uwaleke charged federal government to ensure that the proceeds of the Eurobond id 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 yeild as opposed to what they would get in European markets.
Uwaleke 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 the latest budget implementation reports on the website of the budget office is first quarter of 2016, and 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 also 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” he stated, even as he 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 floats the currency. Querying the school of thought that says the CBN should allow the market determine the value of the naira, he said 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 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 7 months of funding. So if we don’t have this $32 billion, we shouldn’t be thinking of floating the currency.”
Uwaleke added: “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 IMF loan they did the currency float much earlier and they have now seen the outcome. So when people say Nigeria should float, why don’t we look at what happened elsewhere.”