The naira has continued to be in free fall, crashing to an unprecedented floor of N500 to one United States dollar in the parallel market last Friday and exerting pressure all round. There is pain and anguish across segments of the population and market illiquidity is already hurting the real economy. The impact of the months-long crash has included inflation, labour lay-offs, factory closures and inability of many citizens to meet basic needs such as food, health care and accomodation. It is, indeed, exasperating.
Like other markets, foreign exchange markets are imperfect. To ease the pressure, the government should immediately impose restrictive import tariffs on luxuries and non-essential items. Tooth picks, non-medicinal cosmetics, apples and packaged foods and drinks, among other non-essentials, should attract very high tariffs.
Success requires marked improvement in the efficiency of the Nigeria Customs Service to beat smuggling, while the concerns of the industrial sector over identifying goods that are also raw materials should be taken into consideration.
The Central Bank of Nigeria should step up its surveillance, monitoring and sanctions to check the ongoing round-tripping and sharp practices by banks and bureaux de change. Very stiff penalties should be imposed on those who misuse forex.
Beyond these short term measures, President Muhammadu Buhari should treat the crisis as as emergency. To ease capital controls, a lot of macroeconomic and institutional reforms need to be put in place.
The much harder task is how to support short-term measures with a view to attaining flexible foreign exchange system. Therefore, the economy needs a road map and a firm hand on the steering wheel and Buhari should apply himself to it with as much vigour as he has applied to fighting corruption.
– Balogun Emmanuel Funsho writes from Kabba, Kogi State.
He can be reached on 07034444976 or irule9ja@gmail.com
