The Federal Government needs to introduce a basket of policy measures including naira devaluation in order to address the economic crisis confronting the country.

Group Managing Director/Chief Executive officer, Cowry Asset Management Limited, Mr. Johnson Chukwu stated this at the bi-monthly forum of Finance Correspondents of Nigeria (FICAN) held last week in Lagos.

In a paper titled, Policy Options to Nigerian’s Economic Crises, Chukwu said, “While we clearly support a more flexible exchange rate management, we strongly believe that devaluation alone will not address the problems of the  eeeconomy.

“We need a cocktail of policies which will include exchange rate adjustment, creating windows of investment for long-term funds through concessioning of commercially viable infrastructure, full deregulation of the downstream petroleum industry and stimulating investment in sectors where Nigeria has comparative advantage, as well as investing heavily in social infrastructure such as health, education, security, etc.   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 that we will not be exposed to another crude oil crises as we suffered in the 1980s, 1990s, 2008 and 2015/16”

Highlighting the weakness of the current foreign exchange policy of the Central Bank of Nigeria (CBN), Chukwu said, “To keep the Naira exchange rate within the N197/$ and a band of +/- 3%, the Central Bank has been engaged in aggressive demand management with the disqualification of 41 items from accessing the foreign exchange market and subsequently additional two items, which included foreign students’ school fees and foreign medical bills. The reasons adduced for this policy tend to be more of nationalistic than economic. We however believe that trade policies are better tools to use in discouraging the importation of goods whose import hurt local manufacturers. We have proven cases of successful use of appropriate trade policies to develop specific industries in the country.

“Beyond the above drawbacks of the current exchange rate policy is the fact that it focuses only on demand management. At best it ignores supply improvement and in worst case scenario discourages alternative sources of supply. Because inflows for investment and other legitimate transactions would be converted at official price as against the ruling rate on the street, which will serve as the transaction rate, investors feel short-changed to sell their inflows at the official rate hence their decision to stay away from the market pending when the official rate is reflective of the market situation.”