The Federal Government has been urged to do something fast about the ongoing Foreign Exchange scarcity to prevent the Collapse of the manufacturing sector.
Investment Research analyst, Oyinkansola Aregbesola, made this call while speaking on the outlook for the Economy for 2023.
She added that the Foreign Exchange scarcity is already being felt in the GDP numbers for Q3 which has also shown declining production.
According to her timely action on the Foreign Exchange scarcity will help in ensuring that manufacturers whose business depend on the importation of raw materials for the production of their goods remain in business and continue production.
He disclosed that the Foreign Exchange scarcity has also raised the production and running costs for businesses across the Country.
On the issue of the redesigned Naira Notes, She said this will help in reducing the excess liquidity that is outside of the financial Sector.
She said the policy is a necessary one that will add an extra layer of effectiveness to the Monetary Policy of the Central Bank of Nigeria.
The redesigning of the Naira will also according to her reduce inflation.
She also called for attention to be paid to internal structural issues that have been long term concerns for the nations’ Economy.
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“Some of the people who have significant Business to do may lodge them into Foreign Exchange purchase and that is one of the reasons for the value of the Naira, the decision represents a long overdue action because the amount of Naira outside of the formal banking sector at the point of announcing the decision was unhealthy so but the policy to us represents a good move to mop up the excess liquidity that is outside the banking sector and it will also add an extra layer of effectiveness to monetary policy actions by the CBN, for instance the Cash Reserve Ratio at 32.5% will be more effective in mopping real Sector liquidity in a bid to reign on the demand of the current Nigeria inflation dynamics”
“Limiting the duty of exchange rate stability to the actions of the CBN is one of the communication gap issues that has actually engulfed the space like a wildfire as what affects our FX Conditions extend beyond monetary issues to Other Segments of the Economy for instance the unfavourable balance of payment position is one of the many factors that have made for difficulty in maintaining a market Centric and stable Naira and so thus it is safe to say we need to improve variables like productivity, we need to provide good infrastructure and also improve the Ease of Doing Business in the Country in order to have a shot at improving our balance of payment position, because if our balance of position is improving it will be a foreshadow to an improved Naira health and whatever the effort of the CBN is in recent years are just short term solutions and is unsustainable to our FX Concerns”
“of course it will slow the pace of price rise especially in a pre-election year that we are in but nevertheless the issues i have stated earlier which are issues of productivity, improving the Business Environment, and then closing the Infrastructure gap, those are the factors that are required so that we can have an improved avenue to curb the supply side triggers that have remained the long term concern and the most recent flooding across the nation has not helped owing to the fact it has actually seem to have wiped out farms across the nation and bearing in mind the issue of food shortage which is still a very huge part of Nigeria’s price index, the food basket still accounts for like 51% of the price index”
“For as long as we have Macro-Economic uncertainties across the globe as well as the lingering Russian/Ukraine Conflict, and internal structural issues we have within the country, we are not entirely optimistic about both the global and domestic moves in 2023 but nevertheless our assessment of the expected trend is actually seeing progress”
” For the FX liquidity it has actually had a negative impact on business in general especially those that are very much involved in importing they actually saw the impact in their financial statements, if you look at the operating expenses of some businesses has actually gone up due to the issues of FX liquidity and if not properly dealt with on time it would have effect in the performance of businesses and Productivity as a whole and we have already seen a slow down in the Q3 trends in the GDP you know showing you the effect of structural issues like FX liquidity and so on”
“Giving the fact that most businesses in the sector depend on importation of materials to produce their goods, it has actually affected them production wise and we also saw that in GDP numbers and we feel like something that needs to be dealt with on time in order to ensure that the manufacturing sector stays afloat, stays positive”