For the past ten years, the Nigerian economy has been in a downward spiral even though the decline was accentuated at the advent of the current administration as a result of two major economic policies introduced by the administration. The first was the removal of petroleum subsidy which was closely followed by the floating of the Naira a month later.
Even though many economists agree that these policies are good policies which are necessary to reform the economy, the poor and reckless implementation of the policies sent shockwaves across the country that threw the economy into a tailspin with the value of the local currency and the Nigerian masses being the biggest victims of the government’s indiscretion in implementing those policies.
While floating the Naira has its many benefits, especially in the area of attracting foreign direct investments into the country, doing so in a heavily import-dependent country like Nigeria that depends on one crude oil and gas alone for up to 90% of her export earnings, without addressing certain critical issues about how to significantly increase the foreign exchange inflows into the country was certainly a recipe for disaster.
This is responsible for the crash in value of the Naira contrary to the blame game and buck-passing by the Central Bank of Nigeria (CBN) that initiated the floating of the Naira without making adequate provisions on the supply side of foreign exchange into the country. Before implementing such a policy, the CBN and the federal government should have implemented policies to significantly boost forex inflows into the country to help meet the demand for forex when the Naira was floated on the market.
In assessing the current forex inflows into the country, Nigeria earns an average of $50 billion annually from exports and 90% of this is from the export of crude oil and gas. Of these earnings from crude oil and gas, at least 50% of it is retained offshore by the oil-producing companies to fund their operations so effectively what gets into the forex market from our oil and gas exports is less than $25 billion for a country with a population that is well over 200 million people.
However, Nigeria has a huge and thriving diaspora community that remits between $20 and $25 billion per annum through official channels alone. The figure could be much higher if we consider funds sent to the country through informal channels and this means that diaspora remittances could be the biggest source of foreign exchange receipts into the country which is a testament to the collective strength of the Nigerian diaspora community that could be harnessed to positively impact the Nigerian economy.
Despite the huge amounts of money being sent to Nigeria annually by the diaspora community, the impact that these funds have had in supporting economic growth has been very minimal because most of the funds sent home by the diaspora community are channeled towards supporting their families in Nigeria which is basically for consumption purposes, with very little being used for business or investment purposes and when they choose to invest, the investments are normally limited to real estate rather than the productive sector of the economy that will stimulate economic growth.
If just 20% of the $25 billion being remitted to Nigeria annually is being channeled into businesses in the productive sector of the economy, it will mean an annual investment of $5 billion by the diaspora community into the country and this will go a long way in creating jobs and growing the Nigerian economy.
Another way that the Nigerian diaspora community can support the growth of the Nigerian economy is to focus on importing goods from Nigeria. Already the diaspora community is doing a marvelous job by importing large quantities of Nigerian foodstuff for their consumption overseas which is having a positive impact on the Nigerian economy but we need to take it a step further.
According to the Nigeria Export Promotion Council (NEPC), Nigeria has over 200 non-oil exportable products ranging from agricultural produce to solid minerals to semi-processed and manufactured goods. Based on the knowledge of the import requirements in their host countries, Nigerians in the diaspora can position themselves individually and collectively as major importers of Nigerian goods into their host countries, and by so doing, they will not only be helping to support the growth of the Nigerian economy, they will also be profiting from it as well.
With the deliberate and coordinated efforts by the Nigerian diaspora community, billions of dollars’ worth of investments can be channeled into the country annually while Nigerian products can also receive a boost in the international market and increase revenue from non-oil exports to over $100 billion annually from the paltry $5 billion revenue from non-oil exports that the country currently generates.
This massive boost in foreign exchange revenues coming into the country will certainly go a long way in stabilizing the value of the naira and supporting the growth of the local economy while our diaspora community will be rest assured that their loved ones back home have improved welfare and are less dependent on them.
Kunle Oshobi, a development economist, author, and management consultant writes from Lagos.