Nigeria Must Address Trade Deficit To Solve Forex Volatility – Ogunbiyi
Dr Akin Ogunbiyi is the Chairman of Mutual Benefits Assurance Plc and was a candidate for Governor of the People’s Democratic Party (PDP) in Osun State in the last election. In this interview with ZAKA KHALIQ, he spoke about the need for the country to close its trade deficit to resolve the volatility of the foreign exchange market.
Despite the opening of Nigeria’s borders last year, Nigeria still has a huge trade deficit. Why is this still happening?
We are not a productive economy. We live virtually from importation. The ordinary tissue paper, the little things that we can produce, are imported. Before, we had industrial parks, even in Ikeja. How many industries are still functioning? I remember we had cotton industries producing fabrics along the Oshodi Badagry road. How many are there still?
Thus, the source of the problem is the lack of productivity. When you are not producing, what should you export? We talked about the scarcity of the dollar. What do you think is driving the scarcity of the dollar? I have learned that the ships that have come with tons of cargo to this country always leave empty because we have nothing tangible to export.
You have cargo planes, they arrive every day fully loaded, when they leave, what do they bring back? Nothing. This calls for rethinking. Nigerians are not lazy.
They can produce, why should everyone depend on just a few companies to produce for everyone? People can be called full entrepreneurs, but there is no such thing. There is no incentive for anything. Only the big guys can get the incentives. They are the ones who have access to foreign exchange. We must value productivity.
So we will always be in deficit unless there is a national policy that talks about productivity. Mention any sector of the economy in America or Europe where you will not find a Nigerian among black people. The knowledge is there, but we are missing one thing; we will not allow our people to apply knowledge to generate productivity and without productivity we still have a negative trade balance.
What is the solution to the scarcity of forex in the country? Can unification of the exchange rate help?
If you have something so rare, why don’t you just have one conversion rate? They sell money to Bureau de Change operators at a different rate; you sell to the importer at a different rate. When the federal government has something to do, it knows how to get money at another rate from the central bank. All of these things are corruption. Let’s have a single exchange rate. Something that is so scary, why give people the option to choose their exchange rates?
The federal government has narrowed down the list of things it uses forex to fund. Make everything available. The only reason to solve this problem is to have only one exchange rate so that everywhere you turn it is the same rate as you get it. There will be some common sense. Everyone knows what to do, but who are the people who run it – who run our government. How professional are they? But they find themselves there; So what can we do?
Government borrowing has increased in recent times, and for this reason most of our income is used for debt service. What is the implication of this?
There is nothing wrong with borrowing, but when you borrow and there is nothing to show and only one commodity – oil – is the way to repay, then that is a major problem. .
Leveraging an economy isn’t bad, but when you take advantage of it, you take advantage of certain things. What are they borrowing against? Is it for infrastructure, electricity or social infrastructure? But when you borrow just for the sake of borrowing, before you even bring the money, they split it up. It is regrettable.
Why do we borrow? Borrowing, in and of itself, is not a bad thing. The price of oil is good now. What are our oil reserves, our external reserves? Look at what the dollar represents to the Naira. You can’t even find a dollar to buy. We are not a productive economy; we are a rent economy. An annuity economy should not seek to borrow money.
When we borrow money, what for? Listen, the Lagos-Ibadan highway has been around for a decade now. This increased the value of the contract; it has been dubbed over and over again. It is regrettable; we’re not supposed to borrow at all. It is time to take austerity measures. Now is the time to live within our means.
I’m not against borrowing, but I think the federal government needs to watch this. The country owes around 35 trillion naira; our external reserves now stand at just over $ 30 billion. They don’t have the money to keep it going. I am an entrepreneur; I know the value for money. I know what it takes to make this naira.
We are already over-indebted, but if we need to borrow, borrow for a specific project and let the people we borrow from certify the value of the project so that we know what we are doing.
All the loans that states have contracted, who regulates them? We have different agencies spending money here and there. Agencies are also part of the federal government’s problem. They budget heavily for them despite being income generating agencies. When they earn money, what do they do with it?