The potentials and prospects of the
Nigeria economy are still intact and promising despite the continued
slide in crude oil prices, Managing Director, Cowry Assets Management
Limited, Johnson Chukwu has said.
Speaking at the weekend during a
Bi-Monthly Forum organized by the Finance Correspondents Association of
Nigeria (FICAN) in Lagos, he says the economy is still a huge market for
consumer goods, capital goods, financial services, information and
telecommunication services, agricultural goods, oil & gas products.
Chukwu who spoke on the theme: ‘Policy
Options for Nigeria Economy Recovery’ said the country’s trade, real
estate, transport infrastructure, power infrastructure, entertainment
potentials remain a plus for the economy. “There is no single sector of
the Nigerian economy that has fully developed, talk less of being
matured,” he said.
He said a look at the movement in
exchange rate of other oil dependent economies indicate that most of
them have allowed their currency to adjust to the strength of their
export earnings apart from Venezuela and Egypt.
Chukwu said the Central Bank of Nigeria
(CBN) has been engaged in aggressive demand management with the
disqualification of 41 items from accessing the foreign exchange market
so as to keep the naira exchange rate within the N197 to dollar and a
band of plus or minus three per cent.
He said that trade policies are better
tools to use in discouraging the importation of goods whose import hurt
local manufacturers. “We have proven cases of successful use of
appropriate trade policies to develop specific industries in the
country.
A classical example is the Cement
industry where local manufacture has grown from 2,000 metric tonnes per
annum, to more that 40,000 metric tonnes per annum in 15 years. Nigeria
has moved from a net importer of cement to a net exporter as a result of
targeted use of trade policy in the sub-sector,” he said.
Speaking further, he said the ongoing
naira volatility in the parallel market is being triggered by the
inability of the CBN to meet legitimate demand for foreign exchange
adding that while the regulator has effectively maintained the official
exchange rate at N197 to dollar, it has been impossible for the apex
bank to meet all legitimate demand at the official window.
He said a backlog of unmet demand which
has spilled over to the shallow parallel market is driving down the
naira to its current levels.
“With legitimate importers of raw
materials and equipment migrating to the parallel market to satisfy
their demand, the parallel market has effectively become the ruling
market for pricing of imported goods and services within the country,
with the exception of refined petroleum products, which seem to enjoy
some preference in the allocation of forex by the Central bank,” he
said.
He said the shallowness of supply in the
alternative markets and huge demand are already driving importers to a
state hysteria, as they seem to be ready to pay any price to meet their
demand.
“We suspect that ordinary folks and
foreign residents have joined this flight to safety and may be
converting their naira assets into dollar to mitigate additional loss in
value. The danger of an unmitigated progressive depreciation of naira
is that our national currency may lose one of the most critical
attributes of money, which is “as a store of value” and should this
happen, the concerns about the dollarization of the economy will become
real,” he said.