The ‘419’ scam is well known in Nigeria for boasting empty promises of stupendous returns which induce victims to willingly part with their valued possessions.
The perpetrators of this fraud, ply their trade nationwide with targets which cut across the social spectrum and include otherwise, successful businessmen and highly educated professionals, who are usually gullible and driven by the unreasonable expectation of clearly unrealistic returns on their ‘investments’. Ultimately, the bubble would burst and much pain and sorrow would follow.
Similarly, the IMF and other respectable international financial agencies and local economic experts, have commended the recent devaluation and floating Naira exchange rate as ‘investments’ that would ultimately yield great dividends.
We are encouraged to believe that the new forex regime will recharge our economy and sustain inclusive growth with increasing job opportunities, and also reduce our almost total dependence on export revenue from crude oil, by facilitating the realization of a diversified economy.
It is also suggested that a floating rate would create a level playing ground, and encourage marketers to reduce NNPC’s present unwieldy monopoly of fuel imports and also attract investors to build more refineries locally.
Nonetheless, the promise that the new forex policy would attract much needed foreign investment inflow, is probably the most notable claim by supporters of the new regime.
Consequently, CBN trusts that the reported $10-$15bn hurriedly evacuated from Nigeria when oil prices slumped, would be channeled back by foreign investors; sadly, however, the present level of uncertainty and insecurity sustained by our internal socio-economic tensions may not encourage a quick return of investors as yet.
Incidentally, the desperation of foreign portfolio investors to evacuate their funds from Nigeria contributed in no small measure to the present battered Naira exchange rate. As usual, portfolio investors primarily target the unusually high returns on CBN and Federal government’s loans; thus, such investors may borrow at low rates below 5% from offshore banks and reap a harvest of 10% and much more in Nigeria.
Expectedly, however, portfolio investors would naturally still want assurances that ultimately, their original profit projections would not be wiped out by another devaluation. Furthermore, the elevated level of insecurity and Naira rate instability may also deter potential “foreign direct investors”, whose operations would positively add value to our industries and infrastructure and also create additional job opportunities locally.
Thus, the sum of the above narrative is that, the present devaluation and floating Naira exchange rate, may not immediately propel the expected return of over $10bn outflow from Nigeria; in this event, it would be misleading to suggest that the Naira rate will soon become stabilized by a bountiful inflow of dollars, as presently speculated.
Conversely, barely 8 hours after the commencement of the new forex regime, the cost of “yet to be realized speculated benefits”, had already made significant dents on our economy. For a start, Nigeria’s erstwhile celebrated $510bn Gross Domestic product, immediately crashed below $350bn, while per capita income crashed from over $1000 to well below $600 as a clear testimony of deepening poverty.
In addition, the dollar value of all equity listed on the Nigeria stock exchange also plunged from almost $48bn on Friday 17th June to below $25bn at the close of business on Monday 20th June, when the new forex regime commenced. Invariably, all cash income and savings held in Naira, also immediately fell below 60% of their dollar purchasing value on commencement of the new forex policy.
Thus, foreign credit lines, which hitherto supportively reduced raw materials import cost to local industries, may also be cut to further compound already spiraling operational costs and instead challenge the export competitiveness of Nigeria’s real sector.
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