We were going to get to this eventually. The Governor of the Central Bank of Nigeria, Mr. Godwin Emefiele last Monday ended negative speculating about the Naira by devaluing the currency from N155 to N168 to the dollar. Aside from other stiffening measures like the interest rate increase from 12% to 13% adopted to reflect the current reality, which many economists would agree with, the CBN Governor advocated a need for Import Substitution to slow down the run on our local currency.
Altogether, using monetary policy instruments to try to curb our economic problems is the best Mr. Emefiele has done in his capacity has Nigeria’s apex banker. But far from the real issue which are fiscal and cultural, the devaluation policy could spell doom for start-ups in the area of access to capital and for manufacturers who rely on imported materials to produce their finished goods.
Indicative of bigger problems and possibly a tumultous 2015, this latest move by the CBN has called for deep introspection as to the cost of government, diversifying the economy away from oil dependency and encouraging entrepreneurs to engage in large scale production.
In my personal opinion, 2015 will be a good year to invest in the money market for those who have capital as public borrowing will certainly rise given the slump in crude oil revenue. The cost of living will likely rise sharply following the now imminent complete removal of fuel subsidies and the introduction of tighter taxation to shore up public spending.
It will also be a good time to begin to produce simple things that we typically import. That’s where you come in. There are so many things you can learn to produce during this time. Get on the internet and learn how to produce simple everyday products like buttons, plastics, shoes, clothes and so on. I would encourage local entrepreneurs to invest in acquiring technology for producing these everyday items rather than taking their blueprints to India and China to mass produce.
Also, in 2015, endeavour to buy Nigerian. We need to keep a lot of our hard earned petro-dollars inside the country. Buying Nigerian-made products will slow the flow of cash overseas. And while I get that we have an unusual taste for foreign goods, I have advocated that the government impose luxury taxes of some of these preferences. For instance, champagne consumption, for which Nigeria ranks the world
number 2, needs to be curbed.
In the end, government spending needs to shrink massively in consonance with the dwindle in oil prices while investments in entrepreneurial education, Nollywood, tourism and agriculture will be quick fiscal policy wins in 2015.
About the Author: Nehi Igbinijesu is a Nigerian-trained economist. He has worked at several banks in several positions. In addition to banking, Nehi has been a contributor to Connect Nigeria, anchoring the Discover Nigeria Series, a history project to depict positive elements about being Nigerian. He recently authored a soon-to-be-published book for mothers titled, The Code: A Story About Raising Great Women. He lives with his family in Lagos, Nigeria. You can follow him on Twitter at; @PNOigbinijesu
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This article was first published on 1st December 2014
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About the Author: Nehi Igbinijesu is a Nigerian-trained economist. He has worked at several banks in several positions. In addition to banking, Nehi has been a contributor to Connect Nigeria, anchoring the Discover Nigeria Series, a history project to depict positive elements about being Nigerian. He recently authored a soon-to-be-published book for mothers titled, The Code: A Story About Raising Great Women. He lives with his family in Lagos, Nigeria. You can follow him on Twitter at; @PNOigbinijesu
