THE REAL VALUE OF EVERY COUNTRY’S CURRENCY IS A FUNCTION OF ITS PRODUCTIVITY
THE REAL VALUE OF EVERY COUNTRY’S CURRENCY IS A FUNCTION OF ITS PRODUCTIVITY
By:
Nurudeen Dauda
June 16, 2016
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Permit me to add my voice on this very important topic. It is laughable to say that the value of naira will be equal to dollars while we produce little, but consume a lot. 90% of what we eat is imported from abroad, on the other hand, it is even more laughable for someone to belief so. Some people might argue that the recent decision of the CBN is technically devaluing the Naira; however, what those people need to understand is that the value of every currency is a function of productivity. More so, what makes the currency of every country “strong” or “weak” is the level of its productivity and local patronage by its citizens not what the country wants or wishes it to be. The real value of every country’s currency is a function of its productive capacity.
A monoculture as well as an important dependent economy will hardly have a strong “currency” this is because almost everything the country needs requires foreign currency to import it and it has little or nothing to sale at their local market that will attract foreign currency to its local economy. The reason for the continuous fall in Naira to dollar exchange is due to the fall in crude oil price which is the main source of our “foreign reserves” which is supposed to be used in supporting the local currency. The “foreign reserves” on the hand, is used for the importation of goods and services for local consumption.
The problem with the Nigerian economy is the inability of successive governments to develop agriculture, industries, mining, Science and technology etc. We have the local capacity to produce items such as: Rice, Palm oil, Tomatoes paste, Vegetable oil, Metal boxes, galvanized steel, Cement, Margarine , Palm Kernel, poultry products (Chicken, Eggs, Turkey) Indian incense, Tinned Fish in sauce (Geisha & Sardines) Cold Rolled steel sheets, Roofing Sheets, Wheelbarrow, Head Pans, containers, enamelware, Cosmetics, Soap, Plastic, Rubber, steel drum, steel pipes, Wire mesh, steel Nails, Wire, rods, security Wire, Wood particle, board, Wood fibre boards, panel, Wooden doors, Toothpicks, Glass, Glassware, Kitchen Utensils, Tableware, Tiles and Wooden Fabrics.
We have so many Nigerians Schooling abroad, we also have many Nigerians going for medical tourism. We import 41million litres of refine petroleum product daily. We import refine Kerosene, Diesel, etc. All the above mention items and many others require foreign exchange (Dollars). All the students going to abroad for study use foreign exchange for their tuition fees, transporters and feeding. All Nigerians that are going to Egypt, India, UK and USA etc need foreign exchange for their medical bills, and transportation etc. Similarly, all Nigerians that are going to Dubai, UK, and USA, etc use foreign exchange for their travelling, and shopping etc.
However, the only thing that will make our currency strong is if Nigerians will stop medical tourism, Schooling abroad, shopping abroad and beginning to patronize local hospitals. If that happens it will reduce the demand for foreign exchange (Dollars) and that will also lead to the development of our local hospitals, Schools, shopping malls etc. Some Nigerians will likely set up highly standard Schools and hospitals and employ people.
If Nigerians stop going to abroad for shopping, schooling and medicals the Indians and the Chinese people etc., will likely come to Nigeria and set up hospitals as well as Schools and employ people in order to recapture their lost market. The economies of China, USA, UK, India, UAE (Dubai), Malaysia, Indonesia, and Egypt etc., will be terribly affected because they are the countries that Nigerians go to for medical tourism and Schooling etc.
The only thing that will make our currency strong is through diversification of our economy which will improve local productivity. Nigerians need to be buying made in Nigeria goods in order to boost local productivity.
May God bless Nigeria!