Buhari stops Nigeria’s Central Bank from issuing foreign exchange for food imports

Nigeria is facing challenging times as its economy grapples with a recession and a significant decline in GDP growth. According to Andrew Nevin, Partner and Chief Economist at PwC Nigeria, the country experienced a 6.1% year-over-year decline in GDP in the second quarter of 2019 to the second quarter of 2020. With a growing population and a nearly 10% decline in GDP per capita, the implications for poverty are profound. Nevin emphasizes the need to unlock dead capital in the country to stimulate economic growth. One policy option he suggests is to make existing assets more productive, whether owned by the private sector, federal government, or state governments. By transforming these dead assets into live assets, such as through privatizing assets like refineries, Nigeria can potentially revitalize its economy. This strategy could help alleviate the economic challenges the country is currently facing. President Buhari recently directed the Central Bank of Nigeria to stop issuing foreign exchange for food and fertilizer imports, signaling a movement towards a unified exchange rate. While this directive aims to narrow the gap between the parallel market and official rates, it has also created market complexity and confusion. The directive poses challenges for manufacturers, particularly those in the agro-processing sector who rely on both local and imported materials. The move towards a unified exchange rate, however, seems inevitable, as various stakeholders have echoed the need for this transition. Despite the complexities involved, Nigeria's economic landscape appears to be undergoing a shift towards a more unified system. Fiscal policy in Nigeria is under scrutiny due to concerns about high debt levels and decreased tax revenue. The country's tax intake has reportedly fallen by 60%, reflecting the challenging economic environment. Nevin highlights the limited fiscal stimulus measures in Nigeria compared to developed economies, where governments can implement larger stimulus packages. Nigeria's fiscal flexibility is constrained, leading to a total fiscal stimulus of around two to two and a half percent of GDP. In the face of significant economic challenges, including a contraction in GDP per capita and rising unemployment, fiscal policy options are limited. To address the economic crisis and foster growth, Nevin emphasizes the need for Nigeria to boost its GDP through various sectors like agro-processing, power, entertainment, and real estate. Unlocking dead assets, particularly within the real estate sector, is crucial for generating employment and stimulating economic activity. Nevin underscores the importance of turning unproductive assets like the National Theatre into viable resources that contribute to economic growth. Rejuvenating the real estate sector, which has significant potential for employment and investment, can play a pivotal role in Nigeria's journey towards economic recovery. In conclusion, unlocking dead assets and stimulating economic growth through strategic policies and sectoral development are essential for Nigeria to navigate its current economic challenges. By focusing on revitalizing key sectors and promoting productive asset utilization, Nigeria can pave the way for a more resilient and prosperous economy.