Strengthening the naira through policies and market forces

The ongoing trade war on tariffs between the United States and China, the US and Canada/Mexico and its connection with global business is a sensitive issue that shall impact economies, positively or unfavourably in due course, depending on the extent of the strategic efforts made by the respective economies. Fundamentally, economic and commercial activities have financial implications that may be reduced in monetary terms (in consideration of the specific transaction involved), which determines the economic worth or utility value of all products delivered or the services rendered (by the supplier, on consumer’s demand) in the course of every transaction between the concerned parties in a contract. The bigger picture of this scenario involves everything that pertains to macroeconomic engagements, where the aggregated economic tasks and commitments are conclusively executed. On that note, every economy can be classified or grouped as either a “productive economy” or a “consumer economy”. 

It is therefore noteworthy to further infer on all economies that victory in a trade war on tariffs between nations is based on economic performance that favourably aligns to boost export oriented economies that capitalise on their respective comparative economic advantages to sustainably reposition themselves as export driven economies in their respective trade wars. What is playing out between the US and Canada, especially on the very first day of their specific trade barriers (6th of March 2025 Wall Street/stock market), is a good example. This development would definitely snowball to other economies, directly or indirectly.     

Strategic protectionism in this discourse, is particularly a government policy that our local industries within the confines of the organised private sector (OPS) like the Manufacturers Association of Nigeria (MAN) and the National Association of Chambers of Commerce, Industry, Mines and Agriculture (NACCIMA), should leverage (under an “optimally structured” backward integration strategy) to boost the economy; for the exports of goods and services (including oil and non-oil exports in international trade). In doing so, however, all the multilateral agreements the government signed within the regional bloc, the Economic Community of West African States and the African Continental Free Trade Agreement (ECOWAS and AfCFTA) should be tactfully observed and respected, while helping domestic industries to be reasonably competitive at the international market.

For domestic industries in the country to survive in the light of the ailing economy and terribly stumbling exchange rate of the naira, all locally sourced raw materials need to be significantly recreated (with added value), either as “intermediate feedstock” in all products value chains of the nation’s economic sectors, before being exported beyond the shores of the economy, for the manufacture of finished goods. Theophilus Ndubuaku, a professor and the secretary general of the Academic Staff Union of Research Institutions has equivocally proposed a 30 percent value on raw materials to boost the economy, based on an amendment bill for the Raw Materials Research and Development Council (RMRDC), to boost local production.  

This uniquely designed, strategic protectionism proposition does not in any way violate the already signed multilateral agreements but maintains an economic and financial cushioning effect, where the local manufacturers could add appreciable value on the raw materials that are sourced locally. Such arrangement in the manufacturing sector would definitely improve productivity/GDP, economically; and would equally create more jobs within the nation’s labour market. Such government policies, to a great extent, would restrict international trade competition with opportunists or contemporaries that take advantage to unduly exploit the economy on the locally sourced raw materials that are procured with a weak naira, which should otherwise be significantly improved domestically first, before such exports are made for further processing as finished goods.

Another dimension to this strategy where these available, abundant raw materials that are sourced locally readily provide the window to apply the economic principle of comparative advantage, comes handy as a low hanging fruit for economic advancement. Foreign partners could actually be attracted to invest and establish within the real sector of the economy, under foreign direct investment (FDI), once the government adequately provides security, and also creates economic stability by way of an enabling environment to do business with inflation a far cry. Part of the efforts of the government shall include very healthy and robust monetary and fiscal policies that can aid the local currency to recover. 

Grappling with the security challenges that are actually a down side to FDI streaming into the country (among other politically motivated issues), and which are being tackled from all fronts, the attractive side of the weak local currency needs to be exploited in investing within the economy at the current ridiculously low exchange rate of the naira. For foreign investors, it is very attractive to open up shops now with lower investment capital when compared with economies that are operating at a high exchange rate of their local currency. With high activity of FDI in the country, its eventual contribution to increasing productivity will boost the economy, and ultimately lead to the naira gaining strength at the foreign exchange market. 

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