Question: With everything that is happening in Nigeria right now, what do you suggest will be a solution?
Ndubuisi: As I noted 12 months ago that floating Naira will destroy Naira and the economy, Nigeria has to return to the old model because Naira is not matured to be floated as we do not have a lot of economic life jackets to help it in the international currency seas. We can pick N1,000/$ as the official exchange and go with it! If the president makes that speech today, the paralysis will calm down.
The biggest challenge today is not that the Naira is exchanging at N1,500 or N1,400 to US$1, the issue is that the volatility will make it impossible for companies to plan and investors to invest. The exchange rate stresses the traders and speculators, but for investors, volatility kills their plans. So, pegging Naira will deal with that volatility at least for contracts to be worked out in boardrooms.
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The second thing is energy cost. Nigeria must bring full subsidy for industrial customers even as it allows commercial and residential to pay the full rates. Understand that if we do no deepen the industrial base, the vicious cycle will continue. So, to tame inflation and help companies make things, we need to assist them on energy costs which have gone up significantly. But do not give them money, use rebates so that only REAL industrial customers will benefit.
The president should host a press conference and address the core economic issues including the interest rates. Most companies I know are avoiding taking bank loans because of the rates. The implication is that growth will stall. If the interest rate should remain high, can the government offer manufacturers support via other means? My point here is that Nigeria must find ways to encourage makers to actually go to work, and not just work to pay bank loans. Can we waive some taxes? Can we offer tax rebates? Simply, Nigeria must create incentives for men and women to get back to work.
But first, we need to return to the old regime of a fixed exchange rate which is a sensible thing to do.
Comment on Feed
Nigeria does not have an economic problem; we have a political orthodoxy problem. Mr President knows the right thing to do, but the political dynamics is the issue. If he goes on air and pegs Naira to N1,000/$, about 90% of the issues will go. But doing that will open attacks from the opposition.
The biggest issue in Nigeria today is VOLATILITY because when you have that, FDIs will fade. Exchange rate is for traders and speculators, volatility is what keeps investing planners awake. Official peg will solve that.
I expect things to improve in the next 6 months because something big happened yesterday: the government acknowledged that it did not remove fuel subsidies which is a good sign that it can reverse itself. The next is removing the float. In short, this is a nice time to get into Nigeria because the government is going more pragmatic by reversing itself.
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