By: Kasali Seun Emmanuel
Less developed or developing economies have always been on the losing side of the exchange rate with several policies been rolled out by different government of these economies to strengthen the local currency against foreign currencies. With consecutive and persistent devaluation of Nigerian naira by the monetary policy authority, matters arise on why the state of the currency is terrible and frustrating. The rate at which Nigerian naira is exchange for United state of American dollar arose the question; are we by anyway economic self-reliant? In 2020, naira was devalued 3 times by the monetary authority to keep pace with the level of demand for foreign currency. Also, IMF has recommended further devaluation of naira, claiming its 18% over valued. All these have been persistent since the wake of the crash in oil prices which contributes about 90% of the country’s foreign exchange earnings.Before the boom of crude oil in the early 70’s, agriculture contributed majorly to Nigeria’s foreign earnings, it contributed about 83.2% of her foreign earnings in 1960. Increased agricultural product of industrial raw materials reduces dependence on imported inputs and contributes to our balance of payments position, increased employment and food supply. However, its share of the foreign earnings reduced to 1.8% in 1995 and this continued until 2010. Prior to, the introduction of SFEM in 1986, as part of a package of IMF reforms that Gen. Ibrahim Babangida was forced to accept, the crude oil boom in the early 70’s boosted Nigeria’s balance of payment position with the Nigerian naira to the equivalent of pounds sterling and more valuable than the great dollar which was exchanged at 90 kobo to 1$. 1993, when Gen Ibrahim Babangida was leaving, naira was already at 17naira to 1$. Since then, naira has continued to fall against the dollar until today.The relative fall of agriculture can be linked to the discovery of crude oil and fall in world demand for primary products, which constitute the bulk of Nigerian agricultural exports as well as growth of domestic industries in Nigeria which has led to increases in the use of major proportions of some of these products as raw materials. The demand for primary goods declined as the world moved to the demand for and large scale production of manufactured goods for local consumption and export for the sake of foreign earnings and favourable balance of trade.The refusal of Nigerian government to move with the trend of the world demand and also, diversify the economy has played a major role in the persistent fall of naira as our major source of foreign earnings, crude oil, has suffered a drastic fall in price in the world market. Also, the effect of not harnessing in full, natural and human resources can’t be over emphasized.Nigeria, a crude oil endowed country, major and top imported commodity is refined petroleum as the state of her refinery is terrible and also inadequate to meet the demand of the people. Other notable and persistent imported commodities are cars, wheat, raw sugar, packaged medicaments etc. the rate of her importation as a nation has shown we are far from been economic self-reliant.In conclusion, Nigeria’s oil reserve is expected to run out in about 44 years as predicted by experts. Our over dependence on crude oil has shown that diversification is the next way to path. Nigerian government needs to channel more resources towards sectors that will produce goods that will reduce burden on the demand for foreign currency (reduce import) and also invest in education and research. This will create more jobs, increase the purchasing power of the individual, reduce poverty and also lead to achieving all macro-economic goals.