Tope Fasua, Special Adviser to the President on Economic Matters, has called on Nigerians to shift their focus from the 'true value' of the naira to its 'productive value'—the value that keeps the economy engaged, productive, and self-reliant. In a detailed analysis, Fasua argues that an obsession with the exchange rate distracts from the real gains of economic reforms, including rising non-oil exports and a narrowing forex premium.
IMF Report and Naira Valuation
Fasua references the International Monetary Fund's (IMF) latest Article IV report, which states that the naira is undervalued, with the Fund suggesting it should not exceed ₦1,142 per US dollar. Professor Uche Uwaleke, however, argues for a stronger naira, below ₦1,000. Fasua dismisses these projections as based on 'crystal balls,' emphasizing that the Real Effective Exchange Rate (REER) formula used by the IMF indicates a weakening naira, which is favorable for exports. He notes that Nigeria has posted three years of strong trade surpluses under President Tinubu, with non-oil exports growing over 30% year-on-year.
Benefits of a Weaker Naira
Fasua explains that a weaker naira, guided by the Marshall-Lerner Condition, has made Nigerian exports price-elastic, boosting demand from other countries. He lists numerous Nigerian companies exporting goods, including Dangote Group, Innoson Vehicles, SecureID Limited (smart cards), and Levene Photovoltaic Technologies (solar panels). He argues that current policies have reduced the forex premium from as high as 60% to near zero, and the parallel market now trades at rates close to the official market.
Historical Context and Behavioral Change
Fasua criticizes past excesses, such as Nigeria becoming the world's biggest importer of French Champagne and Toyota Landcruisers, and the prevalence of arbitrage where connected individuals profited from cheap forex allocations. He warns against a return to those 'locust years' and urges Nigerians to support reforms that have reduced foreign education spending by 84% and foreign healthcare spending by 96% in Q1 2024.
Call for Continued Discipline
Fasua cautions against sudden naira strengthening, which could reverse gains: imports would rise, exports would slow, and trade surpluses would shrink. He advocates for building 'fiscal, monetary, industrial, and mental muscles' to achieve a sustainable naira value, perhaps reaching ₦500/$1 over time. He concludes by urging Nigerians to think collectively and support the ongoing reforms championed by President Tinubu and CBN Governor Cardoso.
