Don't Miss


Home   >   Business   >   Industries   >   Economy   >   FG urged to expand sources of Forex inflow

FG urged to expand sources of Forex inflow

By on February 20, 2016

The Chief Executive Officer, Cowry Asset Management Limited, Mr. Johnson Chukwu, has advised the federal government to implement policies that would stimulate foreign direct investments (FDI) in the country so as to grow its sources of foreign exchange inflows.

Chukwu, made this call in a paper presented at a forum titled: “Policy Option to Nigeria’s Economic Crisis,” organised by members of the Finance Correspondents Association of Nigeria (FICAN) in Lagos yesterday.
According to the Central Bank of Nigeria (CBN), the country’s current monthly import bill is about $4 billion while earnings are less than $1 billion.

This, the Cowry Asset boss said, means that if Nigeria policy makers limit the country to the current sources of inflow, which is principally crude oil sales, the price of crude oil in the international market must rise from the current level of about $30 per barrel to about $120 per barrel before there can be a balance on its international trade.

“In effect, the focus of policy makers should be rather on encouraging the expansion of sources of forex supply against the current focus of demand management,” he added.

He however stressed the need for the adoption of a flexible exchange rate, which he described as a silver bullet that can be effective for both demand management and supply expansion.

Chukwu further argued that when the price of a currency is adjusted to reflect its earnings capacity, the citizens capacity to consume imported goods would automatically reset at a lower level as they can no longer afford many of the non-essential imported items.

“Irrespective of the so called inelastic demand of Nigerians for imported goods, once the currency is devalued and their naira income is not adjusted in the same ratio, citizens will reorder their priorities and eliminate items that they can no longer afford.

“In many instances, citizens will look for local alternatives to the imported items and shift their patronage to such local substitutes. The increase in demand for the local substitute will spur increase in production and possible improvement in quality.

“With improved quality and lower export cost, Traders may consider exporting such improved local products to neighbouring African countries and may be from there to Europe, Asia, America and other parts of the World. For emphasis, we have a proof of concept of this model in the 1980s during the Structural Adjustment Program when made in Aba shoes, bags and other leather wears became export commodities to Ivory Coast, Ghana, Togo, Gabon, Cameron Congo Democratic Republic, etc,” he said.

 

[ThisDay]