Resurrecting the Naira

The strength of any currency is in its usefulness to other countries in purchasing goods and services from the country which the currency belongs to. Thus, in order for a currency to grow in value, the country which the currency belongs to must produce things which the rest of the world desires to have. This could be anything. Seriously, such as: toys, petroleum, medical equipment, shoes, rice, and so on. If you have nothing to sell to the world the world has no need for your currency.

When they buy from us they pay in naira. On the other hand when we buy from the world we pay usually in U.S. dollars, British pounds, euros or Japanese yen. This is a slight oversimplification, but in theory this is what is essentially happening. The exchange rate for any currency is in a continuous flux based on the demands of importers and exporters engaging in international business transactions. When I was a boy the naira was trading at parity with the U.S. dollar (one to one). Hard to imagine from where we stand today (NGN 180/ USD 1). Where did we go wrong? And how do we recover?

There is a three part answer to that question. One, we have a one dimensional economy, which is dominated by the oil sector. Two, we have an economy which hasn't developed down stream inputs for our manufacturing sector. Three, there has been a steady erosion in the agricultural sector, so we are even importing food. This is as baffling to explain (since we are abundantly blessed with fertile land and water) as why we need to bleed out naira to import petrol. Are we not one of the worlds largest producers of crude oil?

The core of the problem with the weakness of the naira can be explained by poor planning and execution in the structuring of the economy.  No part of the nation's development is to be considered separately. We must have a holistic approach. Everything from education, security, reliable electricity, and healthcare is impacting on the naira. And the value of the naira is impacting on everything else at the same time.

The way forward therefore requires a comprehensive steady attack on our shortcomings in each of those areas.  The incoming administration has campaigned that it will create employment by developing our roads and bridges. They also have presented some creative ideas for bringing power and light. This will be a good start. We the people must hold them to their word. There can be no more business as usual; we have no time to waste.

In correcting the flow of money out of our country the first leak to address has got to be the development of our petroleum refining capacity. Petrol has been our number one import for years now. Producing all of the petrol which we now import would save us $6,500,000,000 yearly. That's money which will remain in Nigeria (1,300,000,000,000 naira each year). What can we do with that amount of money?

The sad part is that we already have the refineries built. It is corruption, greed, and lack of security which has cost the nation this bounty. Between Port Harcourt I & II, Warri and Kaduna, Nigeria has the capacity to refine 445,000 barrels of petrol each day yet we only consume 305,000 barrels per day. This is part of the reason why we see such poverty in our nation. This is ridiculous and I trust that the new administration will put an end to it as they have promised.

When a nation manufactures little yet consumes much it will become poor over time. The naira's fortunes say less about our currency and more about the type of people we have allowed to govern us. For Nigeria to become a truly great and prosperous nation, we must focus on diversifying our economy and exporting more of what we produce. Then the naira will be resurrected.