03/02/2024
NAIRA-DOLLAR MALAISE AND PUTTING THE CART BEFORE THE HORSE WOEFUL ECONOMY STRATEGY.
The fundamental law of economics says the higher the demand the higher the price. Hence, Just like the same mistake the Buhari led administration made of putting the cart before the horse regarding local rice, the Tinubu led administration is making similar mistakes with the Naira which will have far more devastating consequences, cutting across all industry sectors. Back then, the Buhari led administration plan was for Nigeria to produce and consume local rice, banning imported rice, it was done abruptly. What should have been done first was to introduce a price ceiling since there was already excess demand to mitigate the initial shock with foreign rice ban, heavily invest in the sector, when the supply is at par with demand then they remove the price ceiling and leave market forces to determine the price. This simple mistake led to hyperinflation of local rice price, with price increasing more than 300% in the short term before easing a little and has continued to increase steadily with no hope of abating.
It is this same economic mistake the Tinubu led government is making and even more painful, blaming it on common suffering Nigerians. Before stopping to defend the currency of a country that’s heavily import dependent, one must first peruse the balance of payment for areas that’s pressuring the Naira with regards to imports. In this regard the government so far seems to have zero economic plan.
Just like the Chinese model, the Tinubu led administration should create economic zones for industries in key areas of the country for production to counter import, if the government cannot produce power for the entire nation, it can focus on providing power to these areas, with zero taxation for manufacturing companies in the area, provide grants, and offer technical expertise. When the manufacturing firms have started producing enough to meet local demand then the government can ban importation totally, repeating this same strategy over and over again moving from one industrial sector to another before stopping to defend the Naira. This strategy will also encourage private sector to heavily invest in manufacturing instead of its current focus of investing in education, religious and hospitality industries. In Nigeria today, every neighborhood or major street in every state has at least a church, a school and a hotel with absolutely no manufacturing firm while the exact opposite permeates in the West and Asia. The key is investing in manufacturing industries MAJORLY to improve Nigeria’s balance of payment and strengthen the Naira. Any government solution outside this will only be cosmetic and temporary.
The gains from the money saved that would’ve been used to defend the Naira is minimal when compared to the wide spread economic devastation and it’s long term inflationary spiral effects that will increase human suffering beyond our widest imagination from not defending the Naira. Just like the price of rice continues to rise so will the dollar until the right strategy is put in place.
