The Managing Director, Cowry Asset Mat Ltd., Mr Johnson Chukwu, said policy makers should encourage the expansion of sources of Forex supply as against the current focus of demand management.
Chukwu said this at a bi-monthly forum organised by finance correspondents on Thurday in Lagos with a theme, ”Policy Options for Nigerian Economy Recovery”.
He identified a flexible exchange rate management as an alternative policy option that could be taken by the government to cushion the effect of the volatilities in the foreign exchange market.
Chukwu said, ”A flexible exchange rate is like a silver bullet that can be effective for both demand management and supply expansion.
”When the price of a currency is adjusted to reflect the earnings capacity, the citizens capacity to consume imported goods is automatically reset at a lower level.
”This is because they will no longer afford many of the non essential imported items.
”Once the currency is devalued and Naira income is not adjusted in the same ratio, citizens will reorder their priorities and eliminate items that they can no longer afford.”
He said that the increase in demand for the local substitute would spur increase in production and possible improvement in quality.
The economist added that the concessioning of Infrastructure was necessary, saying ”without efficient infrastructure, the country might not become a competitive market for manufacturing”.
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He suggested that some critical infrastructure commercially viable, such as transport infrastructure could be concesssioned while inviting private sector capital to build such under Build Operate and Transfer (BOT).
According to him, this will create a veritable channel for inflow of long-term capital into the country.
Chukwu said a proper deregulation of the prices of petroleum industry would trigger investment into the sector.
He added that the current modulated pricing system had clearly not attracted investors.
He also added that the domestication of the downstream petroleum industry would create employment and possibly earn the country foreign exchange from export.
The managing director, however, said that government should ensure trade policy that would stimulate investment in specific sectors of the economy where Nigeria had comparative advantage. .
Chukwu also said policies should be such that would encourage value addition instead of production of raw materials.
”It is such holistic approach to economic management that will change the structure of Nigerian economy and wean it from dependence on oil for export earnings.
”The concerns of the government have been that these routes will inflict pains on the citizens; unfortunately, there is not easy route out.
”We, however, believe that it is better for the citizens to take this pain once and have the economy restructured.
”So, we will not be exposed to another crude oil crises as we suffered in the 1980s, 1990s, 2008 and 2015/16.
