From Tony John, Port Harcourt
A business expert, Mr. My-Ace China, has decried the alarming exchange rate, now impacting the country’s economy adversely with adverse consequences and untold hardship on Nigerians.
He also identified insecurity and epileptic power generation across the country, as contributing heavily to the cause of inflation, now threatening the nation’s economy.
China, a Port Harcourt-based real estate magnate, spoke yesterday, while speaking at the Rivers State capital, added that it was projected that Nigeria would get to about 12 percent in 2027.
“But, just 2022, we have hit 20.56 percent. That is huge because of the kind of inflation we have in Nigeria.
“The effect is that because not all inflations are negative, we are talking about Nigeria. It is worrisome in Nigeria because we do not have a demand-pull inflation in Nigeria right now. What we have is the cost-push and built-in inflations, the worse two.
“Insecurity is on the rise. When people are no more motivated and secure to go to production location, rate of production drops. This is the case with agro-products (foods). Food comes from farms and the insecurity is in the farm locations. This is where insecurity is core to the survival of Nigerians because more farmers are abandoning their farms. This is driving prices high up.
“In a country that is export-based, the local currency is always strong because you produce what you consume. But, Nigeria that is 95 percent-import-based, and the Naira has gone down badly because of the same insecurity plus bad leadership. What causes exchange rate is no longer gold reserve.
“Before, what caused exchange rate was gold reserve, but now that money is paper currency, what causes exchange rate is level of confidence in the economy. If the global community has confidence in your economy, demand for your local currency will be high and the exchange rate of that currency will appreciate.”
China observed: “Now, because of insecurity and failure of leadership, the demand on Naira is very low. Even our own people don’t want to use the Naira, especially during the presidential primaries when they transacted in Dollars. It was all over the world that we have lost confidence in our Naira.
“Despite the war, the Russian rubble is one of the highest currencies, not because Russia does not have challenges, but the government put a deliberate policy that if you must do business in Russia, it must be in rubble. So, all companies are demanding the rubble, oil is sold in rubble. The demand for it makes the rubble high even with war at hand.
“Exchange rate is killing us in Nigeria because what we did import for $100 at N350 is now at N700, not because the dollar price has increased, but the exchange rate has built a new inflation into its price. If you must sell locally, it must be at double price, which is 100 percent inflation.
“The greatest cost of inflation in Nigeria is power. It is exacerbated by two things that have come together at a very bad time. Before now, we all knew that the national grid had been going down and that amount of power generated had been on the decline.
“We have been making do with generators and diesel, but for the first time, diesel has gone so high (almost N1000) that cost of power has become almost impossible. It would have had minimal impact in a productive economy but it’s a country that is transportation-driven.”
According to him, most goods and services in the country are not consumed where they were produced, nor where they were imported.
He stated: “About 94 percent is import and we must use diesel to transport them from ports to the rest of Nigeria, and that is on diesel. That increases the cost of everything. The food produced in the north is consumed in the south; the imports from the South are consumed in the North.
“So, a combination of reduction of farm activity plus diesel-induced cost adds to drive high inflation. It is double tragedy. That is the cause of our type of inflation.
“We are experiencing the worst type of inflation and it is causing serious dangers including demoralization. Many people are no more motivated to go to their farms and businesses due to cause of transportation and insecurity and exchange rate.
“Not all importers are importing at this high exchange rate because you might bring in goods and it may sharply drop and your goods will be out of market price. So, volatile forex market is too bad. A lot of importers and farmers are on standstill due to apathy and demoralization.”
He warned: “If we don’t act quickly in this worsening situation of Nigeria’s economy that is putting us in a negative spiral inflation loop, if we don’t fight our way out immediately, this will increase and get us into depression. This is because the only way you can solve less goods in the market is to pump in more goods.
“If there is no motivation to bring more goods into the market, it will go worse and inflation will go even worse.”