THE Nigerian economy is no doubt facing serious challenges. One of the challenges it is grappling with is capital flight which might soon assume the proportion ofÂ haemorrhage as Nigerians and corporate bodies are moving funds massively out of the country as well as changing from naira to dollar since September last year.
This year alone by records available in the CBN, between January 22, 2010 to 5th March, a total of $6.734 billion went out of the country. About $1.383 billion went out in the week ending 22nd January. This rose to $1.457 billion in the week ending 4th February. Capital outflow further rose to $1.740 billion in the week ending 12th February and moved downward to $1.091 billion in the week ending 26th and a little further down to $1.061 billion on the 5th of March.
Available figure suggests that during the five-week period a total of $4.648 billion was purchased through the CBN Dutch auction while a total of $1.344 billion was done through direct remittance by the CBN.
Of the $6.734 billion that went out of the country through official means only $100.339 million had letters of credit backing suggesting that the bulk of the outflows was not for production purpose but for consumption. The movement of funds was mainly for business travel allowance, personal travel allowance, direct remittances, etc. This movement of funds has depleted the nationâ€™s external reserves from about $62 billion as at September 2008 to $40.48 billion at the end of March 2010, which by the average importation level can finance 17 months of imports.
The trend became noticeable in October 2009 where in a matter of weeks several billions of dollars was purchased through the banks and bureaux-de-change. For instance in the eight weeks of September to November 2009 a total of $13.894 billion went out of the country. While about $ 757 million went out in the week ending 9th September, the amount of foreign exchange flowing out of the country rose to $1.359 billion for the week ending 19th September.
It however dropped to $ 452 million on the 3rd of October and moved astronomically to $ 3.290 billion on 17th October. The foreign exchange outflow went further up to $ 3.356 billion on the 31st of October and declined a little to $2.397 billion on the 14th of November and $ 2.02 billion and $ 1.262 billion for the weeks ending 21st of November and 28th respectively. Since then the weekly out flow has not been less than one billion dollars.
A country that is in dire need of investable funds cannot afford the luxury of ostentatious living. From the data obtained from the CBN most of the outflows are either for luxury goods, over invoiced items or are for things that can be produced locally. The sad thing in this is that Nigerians on daily basis are creating jobs for countries from where these products areÂ being imported while unemployment in the country is mounting by the day.
Unfortunately Nigerian policy makers have not been able to put in place appropriate policies to help diversify the Nigerian economic base. The economy is more of a consumer economy. The industrial base is weak to the point of being non existent. One of the sad discoveries is that out of the about $1.4 billion on the average going out of the country on weekly basis about $1 billion is for the importation of refined petroleum products. Nigeria is happy exporting crude oil and importing refined products. While serious economies are saving and mobilising internal resources for development, Nigerians are contented with taking money out of the country by what ever means.
At the moment existing companies are operating below capacities, some have relocated to neighbouring Ghana, there as no expansion or new investment in capacity, banks are not lending. The economy cannot move forward without the genuine desire of Nigerians to save and raise investment profile of the country. What is happening now has dire consequence for the entire economy.
Then current outflows of resources coupled with the ongoing banking reforms has resulted in the crash of interest rates in the money market as customers are moving out their deposit. At the vault of CBN are over N600 billion of bank deposit at 1 per cent interest rate as banks have refused to lend just as investors are holding back their investment decisions.
The federal government must come out with an economic blue print to diversify the economic base of the country in the shortest possible time, improve on the business environment, build the necessary infrastructures and ensure that fiscal and monetary policies are in harmony. This we believe will help arrest the current economic drift.