The Nigerian government has been advised to come up with trade policies that will stimulate foreign direct investment into the country, in order to grow its sources of foreign exchange inflows.
The Chief Executive Officer, Cowry Asset Management Limited, Johnson Chukwu gave the advice at the bi-monthly forum of the Finance Correspondents Association of Nigeria in Lagos.
Chukwu said limiting the country to the current source of foreign exchange inflow, which is crude oil, will put so much pressure on the nation as the price of crude must rise to about $120 per barrel before there can be a balance on its international trade.
“In effect, the focus of policy makers should rather be encouraging the expansion of sources of forex supply against the current focus of demand management,” he added.
He also emphasized on the need for a flexible exchange rate, which according to him, would be effective for both demand and supply management.
Policies and Importation
Speaking on the ban on importation of some products, Chukwu described government’s actions as ” nationalistic reactions to economic issues”.
He said efficient trade policies were the best tools that could be used to discourage importation, especially in terms of the price of a currency being adjusted to reflect its earnings capacity.
“Irrespective of the so called inelastic demand of Nigerians for imported goods, once the currency is devalued and their naira income is not adjusted in the same ratio, citizens will reorder their priorities and eliminate items that they can no longer afford.
In many instances, citizens will look for local alternatives to the imported items and shift their patronage to such local substitutes. The increase in demand for the local substitute will spur increase in production and possible improvement in quality.
With improved quality and lower export cost, Traders may consider exporting such improved local products to neighbouring African countries and may be from there to Europe, Asia, America and other parts of the World,” he said.
Chukwu, who emphasized that inappropriate decisions and trade policies were some of the causes of the current economic crisis in the country, however expressed optimism that Nigeria had the potentials to get back on its track.