Consumption pattern as basis for FX accretion

There is no doubt that Nigeria’s inability to figure out a well-defined exchange rate policy is hurting businesses and homes, while creating a certain level of uncertainty that debars investors from tapping into Nigeria’s virile market.

Some analysts believe that something has to be done so as to ensure a stable foreign exchange that will eventually lead to accretion in the nation’s foreign reserves. This is because, the Central Bank of Nigeria (CBN) can only manage what it has as only increase in productivity can guarantee monetary policy efforts targeted at stabilising the exchange rates.

Oil price crash has put Nigeria’s naira on trial for over a year, forcing the central bank to introduce restrictive monetary measures to cut round tripping and Nigerians’ appetite for imports, while inducing productivity-centred mindset among the citizens. Indeed, devaluation will be meaningless without fixing the much needed infrastructure, while, most importantly, there is need for a re-orientation which should be aimed at changing our consumption pattern in favour of locally made goods. Government officials must be in the vanguard of this campaign and our leaders must lead exemplary lives to engender confidence in the locally made products.

Recent advert ‘Wondering why our forex reserves are diminishing’ by the Policy Research Centre is apt and should serve as an eye opener to all:

According to an advertorial of the centre in various national dailies, the CEO of Shoprite – Whitey Basson was quoted in 2013 as saying that “The seven Nigerian stores we already have, sold more Moet Champagne than all our South African stores combined.” He apparently did not mean it in a bad way. Indeed, he might have meant it as a compliment to the huge potential of the Nigerian market.

But the Shoprite CEO inadvertently revealed the problem with us: we waste our precious foreign exchange on luxury goods, putting undue pressure on the foreign reserves. Nigeria has been growing in the consumption of imports and not in the production for exports. We import poverty and export jobs in the process.

We import all sorts of goods: toothpicks, rice, eggs, chicken, tomatoes, lettuce, cucumber, apples etc. What rocket science will it take to produce them in Nigeria?

Between 2005 and 2015, Nigeria’s monthly import bill went up from N148 billion to N917 billion representing a 519 percent increase. The pressure on the forex is now exacerbated by the fall in oil prices. Any wonder then that Nigerians and watchers of Nigerian are wondering where the country would get the forex to meet its bourgeoning import demands!

The only way out is for the country is for its leaders and citizens to curb their appetite for imports and re-order consumption pattern. As it stands, Nigeria’s foreign reserves will deplete to zero if nothing is done to check the trend. Only devaluation will not solve the problem.