AACS calls for FX demand management to curb Naira devaluation

AACS International Consulting has stated that demand management is the appropriate measure to be taken by the Nigerian government in its quest to shore up the value of the Naira.

The AACS stated this in a newsletter by its chairman, Falil Ayo Abina on Monday.

Abina maintained that the current calls from some quarters for gradual devaluation of the Naira as a way of harmonising the rates should be ignored as it could “send the fragile economy into a tail-spin.”

He maintained that considering the peculiar case of Nigeria as an importation-dependent country, management of demand for foreign exchange through such means as reducing health and educational tourism, encouraging local manufacturing and production of goods, discouraging heavy dependence on the importation, among others, should be adopted by the government.

“Everywhere in the world, some form of demand management is practised, but it is particularly expedient in a clime that is heavily import-dependent and encourages significant health and educational tourism.

“A policy that leaves the currency to the total vagaries of the market would have direct severe consequences,” Abina said.

The AACS chairman stated that devaluation, though simplistic and immediate, will have more consequences like further inflation beyond the current 17 per cent, increased rate of unemployment and many Nigerians plunging into the poverty line.

“A devaluation will inevitably increase the debt service-to-revenue ratio past 100 per cent, which would mean the likelihood to seek more facilities to pay domestic and foreign creditors, without necessarily reducing the principal obligation.

“AACS believes that addressing all these issues, especially as it concerns the wellbeing of a significant number of struggling citizens is key, and managing the demand of FX is the expedient way, not the devaluation of the currency which at best is simplistic.

“We need to reduce wastages, increase local production, continue to improve healthcare, national security, encourage innovations in business to meet global demands, support exports of finished goods, and cut bottlenecks around exports,” he said.

 

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