Finally, the Nigerian Central Bank has succumbed to the pressures of the market and devalued the Naira. For over a year, some of us have been arguing for devaluation. We were accused of being unpatriotic. Buhari repeatedly claimed and convinced many Nigerians that devaluation was akin to killing the Naira. What he didn’t tell them was that countries devalue their currencies all the time without necessarily killing the currency. If the devaluation of the Naira was carefully managed and done in conjunction with the diversification of the economy from oil dependency, we would be in a better position today.
The government waited until it’s almost too late. Why is Buhari no longer stubbornly saying he wouldn’t devalue the Naira? The markets have forced him to abandon his nonsensical position. This position is untenable when the dollar inflow is now at less than 1billion a month. For a country the size of Nigeria, it needs substantially more than that. The dollar outflow is greater than the inflow. Our foreign reserves have been halved as a result of trade deficits. Buhari’s ignorance of how the global economy works has led us to this. Either his economic advisers have also been ignorant or they failed to tell him the truth because they wanted to protect their jobs. Reasons they should be immediately fired.
It’s not just enough to devalue the currency. They need to have a strong plan on how they can manage the economy and diversify it. If not, we would be heading toward hyperinflation and the destruction of the Naira, a currency Buhari has claimed he is trying to protect. Devaluations by themselves are not bad. They could be good for the economy. This is only if we are committed to expanding the manufacturing and technology sectors. These sectors have remained dormant because of the epileptic power supply in Nigeria and the lack of government incentives. What Buhari needs to do immediately is to further split the Nigerian power holding company to at least 774 companies, corresponding to the number of local governments in the country. These companies should be immediately sold through an open bidding process. Their licenses should stipulate how much power they need to generate and the timeline for generating that power. The government should guarantee long-term low interest rates on loans for these companies. This is a matter of urgency. The same should be the case with the internet sector. Broadband licenses should be sold across the country and a timeline placed on internet penetration of every community in Nigeria. Nigerians are industrious and talented. Granted constant power supply and Internet access, we would be amazed the level of innovations and manufacturing that would emerge.
Nigeria needs these two things immediately to revitalize the economy as these would encourage foreign direct investments, as well as help with the high unemployment problems the country is facing.
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