By Otaru Oshioke, Abuja
Experts in the financial sector have carpeted the Federal Government over the unstable naira against the US dollar.
They said the instability of the naira is introducing significant risks into the business environment across the country with its attendant effects on the standard of living of the people.
They warned the government to rise to the occasion by taking the bull by the horns and save the naira from total collapse adding that the nation’s economy stands to plummet into a failed state if urgent measures are not taken.
Those who spoke with ThisNigeria on the development include the Chief Executive Officer of the Centre for the Promotion of Private Enterprises, Dr Muda Yusuf, President of the Institute of Fiscal Studies (IFS), Godwin Ighedosa, financial analyst at Cashlinks, Dr David Isibor, among others.
According to the experts, “Presently, N1510 is trading for $1 while no less than N1890 trades for one British pound. This instability makes it difficult for businesses to predict costs and revenues accurately, complicating financial planning and budgeting processes approach in business dealings.
“Today, if one buys a product at the rate of N700 per dollar and when it’s time to make payment, the exchange rate might have risen to N1800 per dollar making such transaction an obvious frustration which could lead to business closures with rising unemployment figure.”
Speaking on the development, the Chief Executive Officer of the Centre for the Promotion of Private Enterprises, Yusuf, said the unstable naira has lots of uncertainty for businesses
He said, “One of the worst things that businesses detest is uncertainty because they need some level of certainty to be able to plan what they are doing –your investment, your housing, and your contract terms, all of which require some level of certainty in the business environment. So it’s a major disruptive factor for businesses and investment across all sectors. It’s also affecting pricing.”
He, therefore, tasked the CBN, saying, “We need to be creative about how to do them, you cannot just leave the currency to be completely floating- I don’t think it’s done anywhere.
“You should have a framework, you should have a threshold within which you can allow some minimum fluctuation, I think that is something we need to do going forward, it’s not good for businesses at all.”
On his part, the President of IFS, Ighedosa said there was an urgent need for the reformation of the manufacturing sector for the government to build internal capacity and produce what the nation needed.
He said, “In this case, we would produce for exports more than what we import, this will help to stabilize the naira, and in terms of short-term management, we need to stop importing inflation into the system, we need to ramp up our foreign reserves such that we can have sufficient import cover, every speculative measures have to be discarded, especially making the invoice payments to be in naira, cut out middlemen transactions in dollars and all of that.”
Ighedosa explained that there has to be a broader fiscal measure that can address the situation in the long term but that in the short term, there might be the need to do some mop up by the apex bank especially, using the open market operation strategy, restrict the amount of the naira in the system.
In his views, an analyst at Cashlinks, Isibor, said the unstable and frequent changes in the exchange rate of the naira against other international currencies have significantly impacted businesses in Nigeria.
He said the impact was not a positive one as it has left business owners constantly lamenting, especially in the manufacturing sector.
He suggested that government should come out to fight the dollarization of the economy with more vigour.
“I can see that the federal government through the various agencies is fighting the war of dollarisation in the economy, it should not stop but ensure that the war is taken to the next level, the government should intensify the fight against the oil thieves, this will appreciably increase oil production for sales in the Niger Delta,” he added.
Recently, the 2023 presidential candidate of the Labour Party, Peter Obi, said a productive economy is key for Nigeria.
“We must produce for exports, we must produce what we eat, we must shun importation of unnecessary items we can produce locally, the government must reduce the costs of governance, and we must shun borrowing s in every guise.
“Unfortunately, this is also being transferred to the trade sector because it is this same rate that is now being used for the computation of import duties, so if you’re importing anything right now, you’re not sure how much it’s going to cost you to clear it until the goods come based on the prevailing exchange rate,” he noted.
