Posts in category: Editorial

It is no longer news that the plunging oil prices have increased pressure on the naira. since Nigeria produces less locally Africa’s largest economy exports mostly crude oil, but it spends its foreign earned currencies on supplies abroad for basic items such as food, wears, electronics, and refined petrol.

According to Nigeria’s foreign trade report, in 2019 alone Nigeria spent about Nl6.959 trillion ($47 billion) on imports compared to N 13.1 trillion ($36.5 billion) a year earlier. It spent about $28.7 billion on invincibles (spend on services such as professional fees, financial services, business travel, medical tourism, etc.)

This illustrates how Nigeria imports everything, and since it produces less locally, thereby increasing demand for the dollar needlessly; importers need American dollars to pay for goods bought abroad, causing depreciation of Nigeria’s local currency.

Though the disparity between the official rate and parallel market rates has narrowed to about 10%, the Naira is still experiencing pressure from the strong dollar.

As a result of this, the Naira has been tanking out as the greenback continue to draw many Nigerians who are moving their assets to dollar dominated assets, with it drawing strength from risk aversion. Since the start of the COVID-19 pandemic, the value of the American dollar has reached record highs, as many investors around the world are rushing to have a part ofit.

The sad part of the case for Nigeria is that the country is not seeing enough inflows of via the financial accounts that can help bridge the gap in the current account of the balance of payment. Right now, the country is looking to obtain over $6 billion in funding from World Bank, AFDB, and IMF as well as debt services relief on previous foreign debt. We believe the government is unlikely to obtain all the foreign borrowing it needs to plug the deficit.

If the needed amount of inflows is not obtained via external borrowings, FPI flows, or FD Is, the CBN could result to significant drawdown on reserves and may eventually bow to a devaluation when it runs out of armory to defend the Naira. Furthermore, a look at the Nigerian industrial sector shows that higher import costs, coupled with a fall in the foreign exchange reserves standing at about $33.9 billion as of 23rd April 2020, are increasing local production costs, spurring domestic inflation thereby depreciating the naira.

The case for further Naira re­ pricing is strong. Nigeria is facing a twin deficit crisis across its fiscal and current account books and these deficits are likely to get wider with the weak oil price and production. Given the trend in the oil market, the US (United States.) dollar rose against a basket of major currencies amid the sharp drop in oil prices, as investors move to haven assets. As lockdown continues and factories stay closed with travel restrictions, oil prices continue to dive lower due to low demand, it draws money from risk assets to the safety of the US dollar and its denominated assets. We, therefore, call on all to see protecting the Naira as a joint responsibility and cooperate with the government to bring down needless demand for dollar. This means we should curtail our consumption of foreign goods, increase productivity and export more.

Now that crude oil has started to lose footing and relevance within the global energy need chain, it is time to fall back on agriculture as a strong source of revenue for the government purse. But it is disappointing that many youths equate agriculture with just mere farming, and so don’t see very strong reasons to tap into the agriculture value chain to help roll productivity and wealth generation in the country. So, there is need for strong government advocacy to encourage young people to go into agriculture, push agriculture as business, not just hoe-and­ cutlass farming affair as well as offering credit support to those in the agriculture sector, including farmers . Effort should be made to make the CBN backed NIRSAL loan work for the ordinary farmers. There is need to relax access to this loan. Next comes the need for advocacy over climate change and its adverse effects on food security and environmental degradation are rising, causing brutal clash over water and grazing resources. The situation in the Lake Chad region where the lake has shrunk to one sixths of its size calls for serious concerns. It is dangerously causing regular clashes in rural farming communities in the Benue valley and other areas.

And to think more than 70 per cent of Nigeria’s population live in rural areas and practice subsistence agriculture. The majority of people are highly dependent on the country’s forests and rivers for their food security and to meet basic needs. The agriculture sector has always been the backbone of Nigeria’s economy and successful partnership programmes were needed in addressing impediments in growth and Cotton. These cash crops were ones of the first means for people to make their own revenue and take part in the local economy. Then the food security aspect is also there as well as export opportunity to earn Strengthening agriculture can produce positive ripple effects in a country’s economy. Investments in agricultural development can help at reducing unemployment and poverty. Agriculture has been at the centre of recent economic progress for many developing nations. Most governments are taking concrete action to address the problems and there is a clear recognition of strengthening agriculture and food systems in a manner that brings more affordable, healthier and diverse food options within everyone’s reach.

Revenue from agriculture could cater for the increasing expenditure the Government had to take care of given the increasing population over the years. And so, in the coming years, there will be a growing need for farmers, horticulturists, agronomists and other related careers where many people can settle. Analysts have repeatedly said one of the common misconceptions about why students did not take up studies in the agricultural field was that it was only limited to farming and animal husbandry. What many do not realise is that agriculture provides a wide range of career opportunities for students so studying agriculture could also be a way for many to find success.

The one advantage we have, is that Nigeria is an agricultural nation. And while we know agriculture based on knowledge passed on from our fathers, we should now adapt to the changing practice in the world. At the same time, concerns over climate change and its adverse effects on food security and environmental degradation should be speedily attended to. For instance, extreme weather changes, such as heat waves and water scarcity, arc negatively affecting crop production. The United Nations warned that climate change is driving global hunger. The trend is changing. The trend is growing. Support for the agriculture sector is increasing. Attitudes toward agriculture arc already changing, but not fast enough. Young people should be made to see reasons as to why they should embrace agriculture as business. And they should be encouraged and supported.