Following rumours in some quarters over the possible further devaluation of the Nigerian currency by the apex bank, the Central Bank Nigeria (CBN), the Managing Director and Chief Executive Officer of Cowry Asset Management Limited, Mr. Johnson Chukwu has said that the further devaluation of Naira was inevitable.
Speaking in an interview with Primetime Reporters in Lagos, Chukwu said that owing to the inability of the CBN to sustain the defense of the nation’s currency, it would have to devalue the Naira so as to protect the economy.
According to him,” if you look at the foreign reserve, the foreign reserve lost about $380 million within a period of about five or six days. We are now talking of foreign reserve of about $2.66 billion and then you are talking of an import dependent economy, yes talking about an economy that is witnessing a lot of foreign portfolio investments, you are talking of an economy that there is a lot of speculations and people are hedging on dollars and then you are talking of an economy where financial institutions are exposed to foreign currency lines and they are buying dollars to cover the lines”.
“It is almost inevitable that Central Bank will have to devalue because it cannot sustain the defense of Naira at the current level. If you look at the forward transaction at the international market on Naira, that forward trade has been at N258 per dollar. So, you are likely going to see the Naira trend towards that direction”.
“It is not likely that the Central Bank will have the capacity to defend the Naira and if it doesn’t have the capacity, the only option is to devalue the currency. So, those who are saying that Naira may be further devalued are stating the inevitable. For me, it is not rumour, it is just stating a likely occurrence”.
Speaking on the implication of the further devaluation of the Naira, he said that the move would reset the price levels in the market which in turn would allow the new price level to take effect.
“The fact is that devaluation itself is not altogether bad, yes, it changes the price level, it punishes those who are on fixed income but honestly, if the country’s economic managers are effective, it will compel us to develop and broaden our productive base and therefore, at the minimum ensure we discourage our import subscription because foreign products will become more expensive for Nigerians to buy and people will have no choice than to look inwards if they cannot afford more expensive foreign products”.
“In every clime where you have a strong productive base, the devaluation of the currency should stimulate local production of goods and services and the way we are going, I think we don’t have any other option than to do that. Once we improve on our power sector and then fix some infrastructure and make this economy a little more productive, then certainly, people in industry will come here to set up industrial activities that they are exporting to us”, he said.
On what role should Nigerians play in the face of this economic uncertainty, financial expert maintained that Nigerians should start consuming made in Nigeria goods as against their penchant for imported goods saying that that way, they could help build a strong productive base that would in turn create employment for the teeming population of this country.
He added,” the basic thing about the action the populace can take is to consume made in Nigeria goods. We need to de-emphasize our appetite for imported goods and look more inwards. As you know, import is a leakage to any economy while export is an injection to any economy because when you export, you are actually exporting labour and other factors outside the country. So as a matter of orientation, Nigerians should look more inwards in their consumption pattern”.