Lately, the country’s external reserves started heading south after impressive accretion over months. This is despite rising international prices of crude oil. No doubt, this sudden reality has however put spikes in the Central Bank of Nigeria (CBN)’s efforts of maintaining a stable Naira exchange rate making it herculean as ever. As of December 2021, Nigeria’s external reserves was in the region of $40.5bn having grown about $5.2bn, representing 14.5 per cent rise compared to 2020.
This has also brought to fore the urgent need to be decisive and committed to economic diversification by the federal authorities. Continuous reliance on oil as the major source of earnings is no longer sustainable. Diversifying the economy to agriculture and non-agriculture products as was witnessed during pre-oil era is the panacea to this quagmire. This we also saw in flashes during the last two economic recessions. Indeed, agriculture and non-agriculture products hastened the country’s exit from the recessions. Oil never did. The role agriculture and other non-oil products played was evident in the relentless efforts of the Central Bank of Nigeria, boosting Nigeria’s productive capacities with its interventions in the economy to reduce import dependence, embrace backward integration and increase export earnings.
Undeniably, we have not witnessed any significant effort from the fiscal authorities, commensurate with the zeal exhibited by the Bank to ensure a friendly economic environment, conducive for businesses to thrive. Defending the Naira has assumed a renewed pressure, making market watchers suggest a further devaluation of the currency. This is also because of Nigeria’s import bills gradually climbing amidst global inflationary pressures, thus causing a surge in the cost of key economic commodities such as Premium Motor Spirit (PMS), food items and materials for manufacturing. For some months running, the country has been unable to meet her 2.5m barrels per day OPEC production quota, producing only 1,197m barrels per day. Simply because of decaying infrastructure, crude oil theft, and technical inadequacies among others.
Unabating security challenges, crippling farming, and other economic activities in some key food belt areas in the country are further compounding the woes of the domestic currency as investors stay away, while rent seekers are having a field day.
With the Central Bank of Nigeria being the only supplier of foreign exchange, foreign investors taking ‘a siddon look’ approach due to apprehensions over ‘over-valued’ Naira, artificial low interest rate and pre-2023 general elections agitations, the reserves may further continue the downward slides, except the fiscal authorities take urgent steps to address these challenges. Major of it all is insecurity. This is because if not tackled headlong, CBN’s numerous interventions to galvanize and diversify the economy through agriculture and non-oil products may amount to nothing.
The government must fix the decayed infrastructure in the oil and gas sector, making agriculture as a business endeavour enticing to the youths if the hope of diversifying the economy is to be a reality and not the same perennial mouthing of economic diversification we all grew up hearing but has been a mirage. Equally, some fiscal authorities saddled with the responsibility of fashioning policies to grow the economy should approach the Bank for knowledge sharing and partnership for the onerous task of economic viability and healthiness.
The Central Bank of Nigeria has been commended for its supportive efforts in the economy and is being misconstrued in some quarters as de facto Ministry of Agriculture and Rural Development, simply because the Ministry of Agriculture seemed comatose. The Bank also has been accused of biting more than it can chew, overburdening itself with mandates outside its purview. But would the Bank also sit back and watch the economy go down and do nothing, when the economy is to maintain monetary and price stability, control inflation, maintain external reserves, safe-guard the international value of the Naira, as well as promote a sound financial system that is collapsing?
Chisom Adindu writes from Awka