Dear Speculators,
The catastrophic collapse in the value of Naira in 2016 has brought more bad news than good news to Nigeria. This has come at a time when currency manipulation in Japan, China and Switzerland to purposely erode the value of their currency in order to gain trade advantages has angered many foreign governments especially America. Britain was lucky to have had the Pound devalued by the financial markets in the aftermath of the Brexit to the delight of the Bank of England whom like many other Central Banks in the western world are now inflation seekers. But not Nigeria, we don't need a weaker Naira, at least not now.
Unfortunately, the drastic fall in the oil price, current account deficit, lower foreign external reserves and withdrawal of foreign investments from Nigeria has dragged the Naira about 58% lower since its January levels at the interbank market. This has almost doubled the rate of inflation in the last one year as imported products make up a significant proportion of total domestic consumption.
Too many bad news can make even the brightest minds blind to new opportunities. By prioritizing trade among ECOWAS nations, Nigeria can improve its balance of payments, foreign external reserves and boost the local manufacturing sector. How so? While Naira has fallen almost 60 percent against the dollar since the start of 2016, Ghanaian Cedi has dropped only 4 percent while the CFA Franc has risen 3 percent against the dollar. This shows evidence that these currencies are now relatively stronger against the Naira, with both currencies growing by at least 56 percent against the Naira this year. This could spur exports to these ECOWAS countries as they seek cheaper imports to compensate their manufacturing deficit.
Nigerians always think of exporting to America whenever exportation is on the table, however this is not the only way to earn dollars. Trading with our neighboring nations can cut logistics cost as well as provide local industries with the demand for locally made products we struggle to achieve in the international scene. These transactions too can be "dollarized" so to say.
It is easier to be a local champion than to be a world champion. Let Nigeria climb the valley by its side before attempting to climb the Everest overseas. We will eventually become an exporting nation with diversified products but it won't happen overnight. Talk is cheap, naivety is cheaper. It will be silly to imagine transforming into an exporting nation without first being self sufficient in those products.
The catastrophic collapse in the value of Naira in 2016 has brought more bad news than good news to Nigeria. This has come at a time when currency manipulation in Japan, China and Switzerland to purposely erode the value of their currency in order to gain trade advantages has angered many foreign governments especially America. Britain was lucky to have had the Pound devalued by the financial markets in the aftermath of the Brexit to the delight of the Bank of England whom like many other Central Banks in the western world are now inflation seekers. But not Nigeria, we don't need a weaker Naira, at least not now.
Unfortunately, the drastic fall in the oil price, current account deficit, lower foreign external reserves and withdrawal of foreign investments from Nigeria has dragged the Naira about 58% lower since its January levels at the interbank market. This has almost doubled the rate of inflation in the last one year as imported products make up a significant proportion of total domestic consumption.
Too many bad news can make even the brightest minds blind to new opportunities. By prioritizing trade among ECOWAS nations, Nigeria can improve its balance of payments, foreign external reserves and boost the local manufacturing sector. How so? While Naira has fallen almost 60 percent against the dollar since the start of 2016, Ghanaian Cedi has dropped only 4 percent while the CFA Franc has risen 3 percent against the dollar. This shows evidence that these currencies are now relatively stronger against the Naira, with both currencies growing by at least 56 percent against the Naira this year. This could spur exports to these ECOWAS countries as they seek cheaper imports to compensate their manufacturing deficit.
Nigerians always think of exporting to America whenever exportation is on the table, however this is not the only way to earn dollars. Trading with our neighboring nations can cut logistics cost as well as provide local industries with the demand for locally made products we struggle to achieve in the international scene. These transactions too can be "dollarized" so to say.
It is easier to be a local champion than to be a world champion. Let Nigeria climb the valley by its side before attempting to climb the Everest overseas. We will eventually become an exporting nation with diversified products but it won't happen overnight. Talk is cheap, naivety is cheaper. It will be silly to imagine transforming into an exporting nation without first being self sufficient in those products.
Emeka Ucheaga,
Managing Partner,
Emeka Ucheaga Advisory
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