An economist and a university professor have advised the Federal Government to focus on export-based diversification as a panacea for a sustainable solution to the present foreign exchange (FX) crisis.
He pointed out that the current strategy of the government, which appears to focus on the supply side involving borrowing dollars to improve liquidity in the near term, may not record any significant success unless the unbridled demand for FX is dealt with.
The don suggested to the government to compel a change in consumption behaviour by enacting a ‘Buy Nigeria law’ akin to the ‘Buy America Act’ of 1933 and recently the ‘Build America, Buy America Act’ of 2021 to curb the demand pressure.
Professor Uchenna Uwaleke, Director, Institute of Capital Market Studies, Nasarawa State University Keffi, while airing his views on the intractable issue of FX scarcity in the country, said, “It goes without saying that export-base diversification remains the only sustainable solution to the present FX crisis.
“The current strategy of the government appears to focus on the supply side, involving borrowing dollars to improve liquidity in the near term. However, it may not record any significant success unless the unbridled demand for FX is dealt with.
“To curb demand pressure, I suggest the government should compel a change in consumption behaviour by enacting a ‘Buy Nigeria law’ akin to the ‘Buy America Act’ of 1933 and recently the ‘Build America, Buy America Act’ of 2021”.
Also, Professor Uwaleke added that Nigeria’s import data supports revisiting and scaling up the Central Bank of Nigeria’s (CBN’s) currency swap deal with the People’s Bank of China.
“Given that the bulk of Nigeria’s imports are from China, it stands to reason, therefore, to explore ways of bypassing the dollars and settling these transactions in the Yuan”, he stated, explaining that “this was the idea behind the currency swap with China, which was largely inadequate in size”.
Professor Uwaleke stated, “In order to increase the stock of Yuan in our external reserves, Nigeria can issue panda bonds, which are bonds denominated in the Chinese Yuan and are considered cheaper than Eurobonds”.
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