By Arize Nwobu
The challenge of foreign exchange, forex, and economic change continues over the years for fundamental and clear purposes. Nigeria’s economy is united and has 90 per cent of oil exports, 25 per cent of Gross Domestic Product and 80 per cent of government revenues.
The aberration reveals a sudden economic collapse and the global economy has a changing mindset. The economic situation is shaking if the global oil market falters, as well as at the same time with significant reductions in revenues and the collapse of government policies.
Wealth is also dependent on imports. A report from the World Trade Organization, WTO, states that Nigeria is Africa’s largest importer and the world’s 25th largest exporter. In a press statement, the former deputy governor of the Central Bank of Nigeria, CBN, Dr. Kingsley Moghalu, said imports in 2021 stood at N6.85 trillion which he said was the highest in 12 years.
The development has many negative effects on the economy. It puts pressure on the local currency, raises the volume of forex imports, creates trading volumes, reduces the local production of imported instruments and reduces the sources of the economy.
Also, the problem of inflation is a key factor for forex challenges. Nigeria may be a manufacturing country like South Africa, but it is not. It has been found that out of the three products produced in Nigeria only seventy-seven per cent of the manufacturing process is very profitable.
The problems of the manufacturing sector are linked to the Structural Adjustment Program, SAP, of 1986. Former Minister of Agriculture and Rural Development, Chief Audu Ogbeh, has blamed SAP for the country’s economic woes. Chief Ogbeh said SAP was a mistake that led to a reduction in the national currency and a reduction in interest rates.
Furthermore, in a research report titled, “Programmatic maintenance program and its impact on the manufacturing sector (1986-2016)”, Murtala Muhammadu of the University of Malaya, stated that SAP has been successful in making manufacturing facilities a priority. irrefutable in the mercy of foreign companies. . He added that “the company’s research has been carried out and found that the improvement forecast has a negative impact on profitability, efficiency, sales, exports and production costs. In particular, its results show that the local economy has fallen, commodity prices. increased by rising prices ”.
Other contributing factors to the ongoing forex challenge include lack of patriotism, widespread corruption and destruction by unscrupulous entrepreneurs and potential stakeholders. has the privilege of violating the law and harming the economy in various ways, including the importation and export of goods and other illegal goods.
The forex challenge has been a physical thorn in the side of the CBN. Forex is the backbone of foreign exchange trading and the key determines some of the most important economic systems.
Forex management is one of the three components of the “trinity of unregulated groups” that undermines the ingenuity of the central bank and the financial forecasting process.
Since the mid-1980s, the CBN will have to consider a variety of forecasting options to manage forex challenges based on the ongoing market and economic situation. The Bank introduced the Second Foreign Exchange Market, SFEM, in 1986 alongside the First Market and later merged and entered the Foreign exchange market, FEM, in 1995 it introduced the Autonomous Foreign Exchange Market, AFEX. There are other rules later.
In 2015, this challenge was compounded by the sharp economic downturn that led to a sharp fall in oil prices internationally due to a shortage that damaged economic activity, but the CBN overcame it with a combination of stable and supported naira.
Recently, the CBN stopped providing weekly services to Bureaux de Change, BDCs of Forex traders to protect foreign imports and forex imports from the oil sales of the pandemic COVID-19 and other things change.
The best banks transferred the initial loans due to BDC and invested in the bank in the new government. Compiled and managed BDC is solid. CBN sells about $ 5.7 billion annually for more than 5000 BDC.
It is noteworthy that the CBN under Godwin Emefiele continues to issue a number of new forecasts that could, over time, correct the alleged corruption of the Reform Correction and the economy, by the agricultural sector to the manufacturing sector and others.
Nwobu, a business entrepreneur and business journalist, writes by arizenwobu@yahoo.com