THE SANATORIUM CALLED NIGERIA

Most of us understand that innovation is enormously important. It’s the only insurance against irrelevance. It’s the only guarantee of long-term customer loyalty. It’s the only strategy for out-performing a dismal economy.

 

Gary Hamel

 

What are we doing differently as a country, and as individuals to get out of our economic mess?

Are we embracing creative INNOVATION

So a friend analyzing the recent rebound in the exchange rate of the Naira, (caused by improving oil prices and a reduction in pipeline vandalism), said:

Now That We Have Adopted A Market-oriented Approach To Managing The Currency Exchange Rates, Two Things Remain To Be Done In Order To Fully Clean Up The Mess Created In The Last One Year By Wrong Policies And These Are:

– Remove The Restriction On The 41-items And Allow Them To Access The Single Currency Window Rather Than Continue To Confine Them To The Opaque Parallel Market.

We Can Then Use Other Measures To (Dis-)Incentivise Certain Activities – That’s Why We Have A Customs & Excise Department And Import Duties.

– CBN Should Publish (On Its Website And Print Media) The List Of Beneficiaries Of The Official Rate Of N199/$1 In The Last One Year.

This Is To Keep With The Transparency And Anti-corruption Standards Of The Administration. We Don’t Have To Wait Until Wailers Make A Mountain Out Of This Before Reacting – Let’s Be Proactively Transparent Here.

Thank God The Market Is Reacting Positively To The New Direction And Hopefully We Can Begin To See A Rekindling Of Economic Activities In Key Sectors.

Great analyses. I agree with doing away with the multiple exchange rates

He further said,

Now That We All Know This Is A Supply Side Problem Mainly (We Are Down To US $1:N400 Vs A High Of US $1:N520) And Not A Demand Management Problem As CBN & This Administration Has Previously Defined The Problem, We Need Sustainable Actions To Boost Investor Confidence And Rekindle The Flow Of Foreign Investment.

Collapsing The Multiple “Official Exchange Rates” Into One Is A Minimum Expectation Here And This 41-item List Which Remains Consigned To The Parallel Market Should Be Addressed.

Access To Foreign Exchange Market Should Not Be Used As A Proxy For Customs & Excise Control Mechanisms

 

I think it is BOTH a DEMAND-side and SUPPLY-side management problem.

 

I wouldn’t know much about these things, as they mostly require financial expertise to grasp properly but saying our situation is MAINLY a SUPPLY side problem and not a DEMAND-side problem sounds incorrect.

The price of anything (including currencies) is subject to the laws of demand /supply. To affect the price, you tinker with any or both of these varies to achieve the required result .
It can’t just be a matter of improving supply alone or curtailing demand..

If you have a personal financial deficit, you can dig yourself out of the hole by SPENDING LESS or EARNING MORE.

Similarly, if we don’t have enough foreign exchange (like the man not earning enough income), we need to curtail the demand (short-term measure) pending when the supply can improve (long-term – except there is an upsurge in oil earnings ).

Sounds like ECO 101 to me.

We produce almost nothing (save oil) but (want to) import everything. We have no DIRECT control on what income we generate as a country, but governmentally spend as if we do.

We are a country of mind-boggling waste, both government and individuals.

Why import / patronise expatriates (companies and individuals) when we have locals who can do the job (national football coach, etc?)

It is like a man whose income is unpredictable but keeps spending on frivolities when he has no reserves to sustain them.

It is like a man who doesn’t earn enough but goes for unnecessary or non-essential items, when he should be focusing on building sustainable (passive) incomes.When we talk of plummeting exchange rates, we are focusing on symptoms rather than addressing root causes.

Nigerians should get real, and learn to patronise their own to grow their own. This is at governmental and personal levels. Continual finger pointing at government means little when we individually aren’t helping matters in our lifestyle choices, and don’t want to retract from our prodigal ways.

We don’t earn enough, as a country. We need to focus MORE on earning foreX, eschew waste, and then the exchange rate would take care of itself.

All the voodoo manipulations by tinkering with supply / demand would just continue to create overnight paper billionaires, continue to make nonsense of the purchasing power of the ordinary Joe- by fuelling hyper inflation and perpetuate our fake tottering paper economy.

An economy built on oil ALONE cannot stand.

Your currency strength is – or should be – a reflection of how well your economy is (not) doing

Nigerians patronise everything from expatriates doing what locals can do or services (foreign tourism?)), and then turn around to complain about not enough foreign exchange, and low exchange rate of the Naira.

It is absurd.

Of course no one can dictate how an individual spends his money. So maybe MORE creative disincentives need to be enforced to discourage people from spending​ their excess money on non-essential things that simply deplete available foreX (luxury goods / services TAX….).

Government itself needs to go beyond lip service to actually frontally tackling infrastructural deficit like electricity without which any country can hope to ever develop.

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