The Federal Government has been asked to put an end to the chronic crude oil theft, boost oil output, and put in place required steps to boost local production and exporting of other items as soon as possible to stem the gradual decline of the naira against the dollar.
In an interview with Newsmen on Saturday, some analysts said that measures were needed to enhance the country’s foreign exchange revenues and close the supply gap.
The Association of Chambers of Commerce, Industry, Mines and Agriculture nevertheless cautioned that if nothing was done promptly, the naira may collapse to approximately N700 to a dollar.
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Manufacturers, business owners, and many Nigerians are concerned about the naira’s value, which has risen to as high as N590 in the parallel market in recent days. While the official rate was N416.23, data from several sources on Saturday evening revealed that the naira had dropped to an all-time low of N600 to the dollar.
The prolonged FX issue, along with the country’s 15.7 percent inflation rate, has resulted in a significant increase in the cost of products in the country.
Mr Johnson Chukwu, MD/CEO of Cowry Asset Management, said the naira has continued to depreciate due to weak foreign exchange earnings, which he attributed to low crude oil production, crude oil theft, and low export of products.
He said, “It’s all about how much you spend on importation compared to how much you earn from exportation. We are not producing enough so we don’t have enough resources to support the naira.
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“The immediate solution is to stop crude oil theft so we can make more revenue, and the long term solution would be to diversify our economy so that we can produce more exportable commodities or produce more of what we consume to limit our importation.”
He said the Central Bank of Nigeria’s interventions, like the closure of Abokifx and ban on the sale of forex to Bureau De Change, could not bring down the price because the current price was a product of demand and supply.
Also, the President, National Association of Chambers of Commerce, Industry, Mines and Agriculture, Ide Udeagbala, said critical infrastructure like power should be fixed to boost local production of goods, both for local consumption and export.
He said, “The exchange rate could get to between N600 and N700 to a dollar with the way it’s going, as long as we are not exporting and we import almost everything. However, how do we talk about production when there is no electricity? The national grid collapsed twice two weeks ago and people had to buy diesel at N700.
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“So, the solution is that we must produce enough for export to earn forex. Crude oil theft is also an issue. If we are expected to produce two million barrels per day and today we are at 1.3 million bpd, is it difficult to know why we are here?
Also, the Chief Executive Officer, Centre for the Promotion of Private Enterprise, Dr Muda Yusuf, said apart from addressing crude oil theft and boosting production, government should consider a flexible exchange rate policy regime, different from devaluation.
He stated, “This model would enhance liquidity in the foreign exchange market, reduce uncertainty in the forex market and enhance investors’ confidence. Also, it is a more transparent mechanism for forex allocation, it minimises discretion in the allocation of forex and reduces opportunities for round-tripping and other sharp practices.”
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