Economist proposes “Buy Nigerian” initiative to resolve FX crisis

Onome Amuge

Uchenna Uwaleke, director of the Institute of Capital Market Studies at Nasarawa State University Keffi, has called on the federal government to enact a “Buy Nigeria law” similar to the “Buy America Act” of 1933 and the “Build America, Buy America Act” of 2021. He noted that the “Buy Nigeria” strategy would spur economic growth,encourage the production of more local goods and services,and provide a sustainable solution to the present foreign exchange (FX) crisis.

Uwaleke stressed that the current approach of the Nigerian government, which appears to focus on increasing FX liquidity in the short term through borrowing, may not lead to sustainable results unless the excessive demand for FX is addressed. He proposed that the country should aim to become more competitive in global markets by increasing the export of commodities and manufactured goods. This, he argued, would help reduce the demand for FX and ease the pressure on the exchange rate.

According to The professor of Finance and Capital Market,it is clear that the only sustainable solution to the current foreign exchange (FX) crisis is to increase Nigeria’s exports. He pointed out that the government’s current strategy seems to focus on increasing the supply of FX by borrowing dollars in the short term, but this may not be effective unless the excessive demand for FX is addressed effectively. He stated that Nigeria needs to boost its exports, especially of commodities and manufactured goods, in order to reduce reliance on foreign currency and ease pressure on the exchange rate.

Uwaleke argued that data on Nigeria’s imports supports revisiting and expanding the Central Bank of Nigeria’s (CBN) currency swap deal with the People’s Bank of China. He observed that the majority of Nigeria’s imports come from China, and it makes sense to explore ways to avoid using dollars and settle these transactions in the Yuan instead. He added that this was the premise for the currency swap between the two countries, but it was not large enough.

He suggested that Nigeria could issue Panda bonds, which are bonds denominated in the Chinese Yuan and are typically cheaper than Eurobonds. This, he explained, would help increase the amount of Yuan in Nigeria’s foreign exchange reserves.