By Omodele Adigun
“When you want to diversify the economy, think in terms of economic interdependence; think in terms of the money in the pockets of our people and what do they spend it on; create those things that they spend the money on.”
This was the verdict of a financial analyst, Mr. Tope Fasua, the Chief Executive, Global Analytics Consulting Limited, in a response to the diversification talk of the Central Bank of Nigeria (CBN).
According to him, diversifying the economy is not about getting foreign exchange(forex). “ And I always try to caution government’s people on that. When you are looking for other means of foreign exchange for the economy, what you do is diversifying the revenue sources of the government. To diversify the economy, the only way to do that is by looking at a diversified economy like Australia and ask; how do these people survive?”,he explained.
Recall that the apex bank boss, Godwin Emefiele, had x-rayed its efforts in promoting import substitution, saying, “the realization that it was unsustainable to fully depend on importation of goods, particularly food items to meet domestic consumption, was what propelled the apex bank into providing cheap financing to the critical sectors of the economy in recent times.”
While exploring the theme: ‘Import Substitution and the Dynamics of Interest and Exchange Rates Management in Nigeria’ at the seminar organized for finance correspondents and business editors in Awka, Anambra State, recently, Emefiele said the major thrust of CBN’s ongoing developmental efforts is geared towards import substitution of what could be produced locally.
He stated: “Strategies to increase domestic production, especially of basic commodities, are necessarily accompanied by industrialization. These measures intensified by the late-1970s when international oil prices began to fluctuate and high importation of basic food commodities became unsustainable.
“The government of the day instituted a program to boost domestic agricultural production, boost food sufficiency and curtail imports.
“I would like to note that fundamentals of the domestic environment need to be promoted to support domestic production and invariably curtail imports. The CBN recognizes these challenges. And within the core remit of formulating and implementing monetary policy, the interest and exchange rates serve as major instruments for CBN’s support for import substitution.
On exchange rate, he said: “The exchange rate is also another essential determinant that may support local production efforts. Most domesticallyproduced goods have foreign substitutes, and the exchange rate serves to allocate the comparative prices of domestic and foreign goods. It, therefore, determines the attractiveness of domestic production to support import substitution.
“Indeed, the CBN has embarked on massive monetary stimulus through direct interventions in sectors that hold immense benefits for the broader economy. Such interventions have been in agriculture, micro, medium and small scale enterprises (MSMEs), power sector, aviation and youth entrepreneurship, among others.
“These measures were necessitated by the liquidity (and credit) crunch that followed the global financial crises. The CBN recently introduced the flexible foreign exchange regime, with forex restrictions placed on the importation of 41 items. This became inevitable in order to curtail fast depleting foreign reserves, occasioned by the significant demand for imports in Nigeria.
“The bank has consistently supported the economy with robust supply of foreign exchange to deposit money banks (DMBs) particularly to meet demands for invisibles such as school fees, medical tourism and personal travelling allowance. This has led to stability in the Naira exchange rate against the US Dollar.”
But Fasua, viewed the issue from another angle, saying Nigeria’s situation is more complicated than what Emefiele thought.
Hear Him: “Where we are now, as regards the economy, is that we can not use only one strategy. Import substitution was very popular in the 70s and in the 80s, especially among the Latin American countries. It was just like saying, what are we importing now? This thing we are importing now, let’s build capacity for people to produce them and sell so that our money would not be going out.Where we are right now is a lot more complicated. The first industrial revolution was powered by steam; the second was powered by electricity.; the third was powered by internet We are in the fourth industrial revolution now, powered by artificial intelligence.
“The age where you use very little to do so much.We are talking of the age where cars are running on water; the next time they would be running on air. We have solar power plant and all that.
“So the challenge has changed. We can not say we want to use import substitution alone(to reboot the economy). You have to use import substitution; backward integration; forward integration; you have to just be real with yourself and know that we are seriously in trouble. Where we are right now is a scenario where we are actually digging hole for ourselves. The first thing you must do when you are in a hole is to stop digging.But we are still digging the hole. We are boring on. Diversifying the economy is not about getting foreign exchange.
“I always try to caution government’s people on that.When you are looking for other means of foreign exchange for the economy, what you do is diversifying the revenue sources of the government. To diversify the economy, the only way to do that is by looking at a diversified economy like Australia and ask; how do these people survive? They call them ‘the Down Under’.
“The economy there is self sufficient. Go to the USA. By far, the most diversified economy in the world.Everythig you need as US citizen, you get it in the US. Anywhere there is a US company, the American government would back it up. When US government gives aid, they wont give you the dollars. They would nominate the US company that would carry out the job and then pay the company in US. When you want to diversify the economy, think in terms of of economic interdependence. Think in terms of the money in the pockets of our people and what do they spend it on; create those things that they spend the money on.”
PERSONAL FINANCE MANAGEMENT
Common household budgeting pitfalls
Anyone can create a budget, but it won’t do any good if it’s poorly designed. To ensure your household budget is a success, avoid these common budgeting traps.
When creating a budget, it’s easy to underestimate expenses. It’s better to play it safe and try to overestimate. You always can do something with saved money, but you might not be able to dig your way out of debt if you underestimate.
Losing track of your spending
Don’t overlook N50 doughnut in the morning. Track and record every Naira you spend, or your budget may not be a true reflection of what you could be saving.
Lacking a grocery shopping schedule
Skipping one week of grocery shopping to save money is useless if you pay twice as much the next time you make it to the grocery store. Instead, shop once a week every week to keep your refrigerator and pantry full, and your household budget intact.
Forgetting monthly bills
Don’t forget those bills that come only once every month. Include them in your monthly budget, and you won’t be caught without the money when it’s time to pay up.
Ignoring emergency savings
Unexpected expenses come up for everyone. Don’t think they won’t happen to you. Build some padding into your budget every month for emergencies. If you don’t need it, so be it, but if you do, it’ll be there.
Missing a plan for extra money
Over time, you might find yourself accumulating miscellaneous savings. Don’t let them sit unused – or risk spending them on something frivolous. Have a plan for what to do with extra savings, such as a place to invest the funds.
Creating unreasonable financial expectations
Never rely on anything but your regular monthly income. Counting on a bonus, tax refund or promotion can impact your ability to maintain your budget.
Lacking spending control
Your budget won’t work if you can’t control your spending. If you struggle with this, there are many techniques that can help you. For example, you might choose to follow a cash envelope system in which you put your budget allotments of cash into envelopes; when the cash is spent, and the envelopes are empty, you’ll have to stop spending for that budget cycle.
Making exceptions for hobbies
When the weather turns nice, it can be tempting to go a little crazy with household projects. Be kind to your budget, and never take on more than it can handle.
Stalling the budget during bad (and even good) times
When unexpected crises arise in your life, your budget can feel like an unmanageable stressor that’s tempting to ignore. On the other hand, when you’re on vacation or enjoying good fortune, your budget might threaten to dampen your spirits. Don’t be too quick to abandon your household budget in times like these. It got you to where you are, and it can keep you there.