For years now, Nigeria has struggled with economic underdevelopment, leading to inadequate Investment and performance in various sectors such as social services and infrastructure. This trend has been perpetuated by ineffective economic policies and governance. Coupled with a lackluster Export sector, dependency on imports, and rising inflation, Nigeria has found itself vulnerable to unofficial dollarization, despite its moderate economic size. The widespread use of the US Dollar in transactions and as a store of value, along with indexing prices and incomes to the dollar exchange rate in the country, have had significant impacts on the Economy and finances, creating potential risks and consequences.
This has also pushed our domestic currency under intense pressure, limiting the effectiveness of monetary policy and forcing policymakers to react rapidly. Inflation skyrockets, causing prices to soar and prompting skilled workers to leave en masse for better opportunities overseas. Foreign Investors withdraw their investments and move elsewhere, resulting in a negative impact on the economy overall. To escape the unintended reliance on the dollar in Nigeria’s economy, it is imperative to enhance economic planning and coordinate policies among monetary and fiscal authorities and other key players.
Impose ban on using foreign currencies for local transactions.
Furthermore, it is crucial to implement strategies that boost efficiency and incorporate initiatives that address economic recovery in the short, medium, and long run. In the short run, the Central Bank of Nigeria (CBN) should immediately enforce a ban on using foreign currencies for local transactions and payments within the next year. Additionally, they should set limits on the amount of foreign currencies allowed to be held, and mandate the domestic production of all Petroleum products by 2024. This measure aims to eliminate the reported annual expenditure of 25 to 30 billion USD on importing petroleum products.
Over the next few years, the government must prioritize monitoring significant oil and gas ventures set to be finalized by 2026, with the capacity to generate vast profits for the Nigerian economy. Some major projects currently in progress in Nigeria are the 5 billion USD Nigeria LNG Train 7, which reached about 60 percent completion by the end of 2023; the BUA Petroleum Refinery in Akwa Ibom State, capable of processing 200,000 barrels of oil per day; and the brass methanol plant in Bayelsa State, set to be operational this year and capable of producing 10,000 tonnes of methanol.
Transform Nigeria into a prominent manufacturing hub.
The government must prioritize resolving long standing issues in the power sector by fully privatizing all Electricity assets owned by the Federal Government, including the 40 percent equity in distribution companies, to empower Private Sector investors to lead the sector’s revival in the long run. Additionally, there is a need to privatize the Ajaokuta Steel plant to stimulate growth and development. It was also recommended that the government transform Nigeria into a prominent Manufacturing hub to maximize the benefits of the African Continental Free Trade Agreement (AfCFTA) and embrace a strategy focused on exporting goods.
It is also crucial for us to shift our consumer habits towards supporting locally made products in order to change our mindset away from relying solely on foreign goods. We need to recognize that quality does not always come with imported items. To promote this change, both federal and state governments should take the lead by prioritizing purchasing goods and services that are made within our country. The Nigerian economy has experienced unofficial dollarisation due to longstanding policy failures that have caused the collapse of various economic sectors.
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Such a situation has resulted in a lack of development and ongoing struggles in the energy industry, a decrease in manufacturing activity, and a significant drop in oil production and exports, leading to limitations in our export capabilities and causing Nigeria to heavily rely on imports. Transitioning away from reliance on the US dollar in the Nigerian economy is part of a strategy to rejuvenate our economic system, boost its efficiency and competitiveness, promote domestic manufacturing, and support industries focused on exports. Encouraging the use of locally made products and services over imported ones is a key focus for both the government and citizens.