TEKEDIA
Nigeria’s floating of its currency, while progressive, will cause severe perturbations in the economy – and a stable state may not come as most experts have predicted: “The cost of petrol is expected to further rise as much as N700 per liter in northern Nigeria, and around N610 in the south from July, The Punch reports.” You will see state-wide comparative advantages emerge with energy cost making most northern areas less appealing for localization of “industries”. Read my take on why Uyo has a promise ahead.
In his O’ Level textbook on economics, AO Lawal explained demand and supply and the movement of price on the demand-supply curve. If I apply what he explained in that book, floating naira with no capacity to earn USD dollars will kill Naira, because there is an asymmetric imbalance on demand and supply of USD in the Willing Buyer, Willing Seller nexus. In other words, two people may each have $100 to sell while twenty people want to buy each $100. If you do not close that number to near parity, the equilibrium point will keep shifting and I do not see how Naira will stabilize because demand outweighs supply here.
I have read many theses on how Naira will stabilize to N680. Good luck. But if you visit Marina Street in Lagos, and climb one of those tall buildings (I have friends who give me access whenever in Lagos), look at the far habour, count the number of ships coming into and leaving Nigeria – and then examine their capacities. Most come loaded, most depart empty! What does it say? We spend more US Dollars than we can “create”.
I call on the Nigerian government to focus on policies which will create more US dollars by deepening our industrialization policy. But to think that we can float Naira and it can stabilize over time by pure financial engineering is an illusion. AO Lawal would have graded any suggestion “P8”. Factories, warehouses, etc for physical, digital and services will strengthen Naira, and nothing more, and Nigeria needs to get into that.
Good People, Nigeria must FLOAT industries (yes, companies) to get Naira to fight globally! And here floating companies mean starting enterprises across industrial sectors and growing them to the point they become public companies because they have become super successful.
