Muhammed Sanusi, former governor of the Central Bank of Nigeria (CBN), says the devaluation of the naira will continue unless Nigeria’s appetite for imported items reduces.
The CBN has had to devalue the naira twice in 2020; first from N306/$ to N360/$ and from N360/$ to N380/$.
Speaking during an interview with Arise that aired on Friday, Sanusi said Nigeria is yet to tap into its economic strengths using the comparative advantage system.
He said the country imports both things that can be locally produced and goods that cannot be locally made.
The former emir of Kano faulted the government’s dependence on oil, saying such action by successive administrations has impacted the economy negatively.
“On exchange rates, we are looking at a monoculture economy. Over 90 percent of what government earns comes from the oil sector and oil is a commodity, the price goes up and down. We set up the country to suffer,” the former of Emir of Kano said.
“First of all, you will fix a price for petroleum product even though you are not refining your petroleum products. How can you fix a price for a product you do not produce. We produce crude oil but the price we fixed was for refined petroleum product.
“So if the crude oil price goes up, we get the benefit of high crude oil price but we lose it immediately because we have to pay more as subsidy for importing refined petroleum product. So we are the only oil-producing country that does not see the benefit of rising oil prices.”
Sanusi explained that the naira will be protected if Nigeria coordinates local production with other West African countries.
The economist said Nigeria can develop an interest in producing solar panels using sands, iron bars and other resources at the nation’s disposal. He said such an effort will provide electricity, create jobs, and boost the economy.
The former monarch also commended the incumbent administration for auditing and publishing NNPC account for the first time in two decade.
“Now we need to look at those accounts and ask questions so that more and more of that money won’t just keep be drained but rather gets to the central bank. The central bank has the foreign exchange reserves to protect the currency,” he said.
“The ministry of trade has to also support. If the CBN says you can’t import this and that, the ministry of trade needs to work on that. And we have to look into how to work with other African countries. We need to agree that all of us in West Africa need to create a situation where we do not import that which we can produce locally.
“You cannot fix this cycle of devaluation until you fix the underlying economic fundamentals and reduce your dependence on things you import. I am not saying we should manufacture planes or computers. What we can produce locally we import, but what we have a comparative advantage should be locally made.”
In 2014, the CBN officially announced the devaluation of the naira, thereby allowing the national currency to depreciate, amid falling crude oil prices and pressure on foreign exchange.