A palpable fear of devaluation of the Naira enveloped the country in the last few weeks as Central Bank of Nigeria (CBN) braced up to allow the Naira to fall to new levels against the United States Dollar.The persistent pressure on the country's external reserves as a result of the dwindling oil prices in the international market has brought in its wake the fear of an impending devaluation of the Naira especially as the country's currency fell to a new record low of N164.85 to the U.S. dollar following inability of the CBN to meet bank customers' total demand for foreign exchange at the Wholesale Dutch Auction System (WDAS). Indeed, there are fears that if the Naira continues its current rate of devaluation, it could exchange at between N180 and N200 to the U.S. dollar by the end of this year. That the Naira is taking this big bash is not surprising. For one thing, Nigeria's economy is under-performing as poor infrastructure and lack of investment-friendly environment have forced many companies to close and set up in other countries like Ghana where infrastructure, particularly electric power supply and investment environment are better. In addition, capital flight has been the order of the day as investors continued to take their money out of the country following the downturn in the economy. As at September 29, this year, the country's external reserves dipped from $34.82 it attained mid-September to $32.52. While the country wants to develop, it must be noted that foreign investors are interested in stable high growth economies to invest their funds. If the growth of the economy slows down, it will become unattractive to foreign investors and it will encourage capital flight from the economy to other countries with macroeconomic stability and high growth potential. It is indeed sad that at a period when the country's oil receipts are at its highest, accretion to its foreign reserve has been appallingly paltry. What this means is that the country has not been saving for the raining day. Instead, it has been spending whatever revenue accrued to it from the sale of its crude oil. This is dangerous, especially for a country that is aspiring to become one of the first 20 leading economies in the world by the year 2020. If anything, the handwriting has been on the wall for quite some time. With the government's spending spree such that every accretion into the country's reserves was immediately used up in spite of the World Bank and IMF caution to the contrary, it was only a matter of time for the country to be driven into this economic quagmire that it has found itself. With devaluation, the prices of food items, accommodation, transportation, and virtually anything that money can buy will go up. The implication of this is that Nigerians will be worse off than they are now as they would need to spend more to even maintain the living standard that they have now. It must be noted that the country's external reserves will continue to be under pressure and the value of the Naira will continue to slide against other countries' currencies, if definite actions are not taken to reverse the trend. A time like this calls for tough solutions to improve the economy and salvage the sagging value of the Naira. Towards this end, the Federal Government would need a better husbanding of the accretion into its reserves. At the same time, devaluation of the Naira and removal of subsidy on petroleum products are not the answer to the problems at hand, more so that such actions could have unpleasant backlash on the economy, create social unrest and defeat the purposes they were meant to serve. Indeed, at this time, the government cannot afford to take any decision capable of creating mass unrest among the citizenry with unsavoury effects on the economy. Therefore, the economic management team of the government must know that it is suicidal for the government to devalue the national currency at this point in time, especially because of the ill effects of such a measure on the overall economy and on the citizenry. Devaluation would be beneficial to Nigeria if it is a net exporter of agro-allied products and other manufactured goods. Unfortunately, this is not the case. Nigeria is a consumer society, importing virtually every item including what it can easily manufacture. In fact, there are other measures that could be taken to salvage the economy from the impending collapse and put it on the path of growth again. In particular, the government should take a hard look at those items of expenditure that have been gulping its foreign reserves and take definite actions on them. Also, the importation of luxury items must be drastically reduced if not completely stopped. Among such luxury items are cars and exotic drinks. The country must also stop the importation of items that can be produced within the country. These include agricultural products such as rice, fruit juices, tooth picks and wines. There is no reason why Nigeria should continue to import rice which can be grown in any part of the country. In short, this is the time for members of the economic management team to put on their thinking caps and creatively evolve the right mix of packages that would reverse the sagging value of the Naira and also improve accretion into the country's foreign reserves. That way, the country's economy would be on its way to recovery again.
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