Experts express divergent views on the devaluation of the naira and the expectations about the economy
Former University of Lagos, Economics, lecturer, Kayode Familoni, says devaluation as a policy may not help the Nigerian economy because of the relatively low level of non-oil revenue: “Before that policy can work, the non-oil sector must be significant, which, at present, is not the case in Nigeria. The price regime in the oil sector is exogenously determined, it is not controlled by the country,” he said.
Conference of Nigeria Political Parties, CNPP, will want the Federal Government to address the falling value of the naira. In a recent statement by its National Publicity Secretary, Mr Osita Okechukwu, in Abuja, the coalition of political parties said it is alarmed with the free fall of the naira; which it described “an unholy heavy taxation on Nigerians’’.
‘’Whereas, we acknowledge the global financial meltdown; however we strongly frown at the free fall of the Naira and lack of imagination or underestimation of the global meltdown by president Umaru Musa Yar’ Adua administration. Government has been dithering or at best confused, improvising and ineffective, since the global meltdown which initially they claimed Nigerian economy was immune from’’.
The group of political parties thereby called for a more structured response to the current economic crisis by the administration of President Yar’Adua. CNPP noted that the slide of the Naira would create uncertainty, instability, high food prices and hyper-inflation. Nigerians, according to CNPP will be the victims of the free fall of the Naira, while government would remain the only beneficiary. “Nigerians are the losers because oil is the only source of our foreign exchange earner and the oil is sold in dollars not in Naira. It is trite in economics that nations devalue their currencies to enhance exports. In our own case, successive governments in Nigeria had abandoned agriculture and light industries, leaving us with mono-oil- economy. Therefore, we cannot benefit for we have nothing to export except oil.”
Dr. Biodun Adedipe, a financial analyst and research consultant to some Nigerian banks, has, however, predicted a positive outlook for Nigeria’s economy in 2009, provided government gets its policies right. The stock market, he said, will experience a rebound. The bearish run in the market will ease by the end of March, because of changes that might result from the market’s “actors and their actions.”
“I expect there will be some changes within the regulatory authorities, because the reality of the market is that investors confidence in the market, to a large extent, is shaped by not only the actors, but also by their actions. And a single change in their action can be a major driver of change in the stock market,” he stated.
On oil price, he says: “Oil price will be steady around $55 to $60.’’ On Nigeria’s oil production, he said the production output will be steady, and shut oil wells may be revived if the relative calm in the Niger Delta is sustained.
“The global economic situation will improve,” he says. But if it stays the way it is, Nigeria’s economy he says will not be seriously affected. “There are many aberrations in Nigeria’s economy which always work to our advantage, when there is a global economic problem,” he stated.
On how government can curb unemployment and companies folding up? He said the federal government has to priotise its expenditure. “Government must restructure expenditure to focus more on capital items, in particular, infrastructure.
“If the government looks in that direction, they will get more value from the available resources and this will positively impact on the economy in terms of improving manufacturing and reducing inflation.” He also said the Central Bank has a role to play in coming up with “an effective monetary policy that complements the fiscal policy. “Which means an autonomous CBN should be more active in checking on the cost of fiscal operations of the government itself,” he submitted.
But Dele Sobowale, a financial analyst, only fell short of predicting total doom for Nigeria in 2009. Describing the budget for the year as “one of despair,” the columnist, who spoke exclusively to TheNEWS, said the fact remains that there is going to be a recession, which he blamed on falling oil prices. He predicted that the naira value will decline even further, even going higher than N150 per dollar.
He is also not convinced that the stock market will bounce back soon, pointing to the fact that “foreign investors are removing their money and are not likely to be back soon. I don’t even think Nigerians have the money to make up the shares. I can’t see the stock market coming out stronger than what it was in 2008.” He warned that “the common man would have to tighten his belt. No doubt, inflation would be higher and it would affect everybody, common man or not. The unemployment will be higher next year, so the common man should be ready to find himself a job,” he argued. He concluded, however that he is not expecting total doom.”
– Report By Oluokun Ayorinde /Abuja, Tokunbo Olajide and Adejuwon Osunniyi.
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