The productive value of the naira, By ‘Tope Fasua

In the past, I had written about our rather obsessive preoccupation with ‘the true value of the Naira’. Every talking head on our favorite TV channels waxed lyrical about this true value, with many foisting what was their sheer opinions as the pure gospel, akin to the tablets with 10 Commandments that God himself handed over to Father Moses for the Israelites. How many times have they sworn that the naira is overvalued, and that we must devalue urgently (the usual refrain), only for the naira to gain strength? Many have applied academic formulas strictly to this naira value, with some suggesting a crawling peg by which the naira will be devalued yearly by the difference between US and Nigerian inflation (that would be an endless devaluation as far as the eye can see, because Nigeria – a developing country – is not expected to achieve 2 per cent inflation which may mean that our economy will not achieve growth at all, after all some healthy level of inflation is important for economies like ours to grow).  If inflation was too low in Nigeria, that would be a disincentive to productive industries who need to be able to mark up their prices from time to time (if only to adjust for imported inflation that comes with their raw materials or other inputs). Inflation at say 2 per cent in Nigeria would be too close to deflation, which marks a death knell for industries and the economy. Pakistan went through this barely two years ago.

Recently, the International Monetary Fund (IMF), in its latest Article IV report on Nigeria, stated inter alia, that the Naira was undervalued. The Fund believed that the Naira should not exchange for more than ₦1,142 to the US Dollar. Some other eggheads, notably Professor Uche Uwaleke, have weighed in to say that the Naira should even be stronger than ₦1,142. To Uwaleke, the Naira should trade somewhere below ₦1,000 to the US dollar – according to his own crystal ball (which I suspect many of these geniuses have in their wardrobe closets). The IMF – according to its statement – worked with the REER (Real Effective Exchange Rate) formula, which compares the nominal value of a currency to a selection of other major currencies. According to the science of REER – which is a moving average – a rising REER means that a country’s currency is strengthening (which is bad for exports). A falling REER means a country’s currency is weakening (good for exports). Invariably, IMF’s crystal ball shows that the naira is weakening – hence the continuous rise in Nigeria’s exports (beyond oil and gas), and the three years of strong Trade Surpluses under President Tinubu. The question today is; should we maintain this trajectory, or truncate it? I suggest that we shouldn’t truncate this current run.

Now, this news of an undervalued naira gladdens the heart because it is a clear indication that the economy is better-managed, that we are saving for the rainy day, and that Nigeria has departed from that era when we thought we could spend any amount of money anyhow after all ‘we were Nigeria’, we had oil in the ground and could flex as we liked. That exceptionalism is why we became very import-dependent and for a country of over 200 million people – the largest population in Africa – we were in a cul-de-sac (we aren’t out of the woods yet but with the reforms championed by President Tinubu it seems obvious we have stopped digging ourselves further into a burrow). The news is also a rarity – a departure from decades of being told we had to devalue and the flowers should go to the right quarters too. Governor Cardoso is running a tight ship at the CBN and has managed to achieve an intricate balance, ensuring the naira does not float away into oblivion, but that there exists a remarkable level of transparency in that market for all players to express themselves and such that the naira achieves price discovery. At the current ₦1,350 – ₦1,380 the market oscillates very gently (no longer violently) and even the parallel market has taken a cue, sometimes trading even lower than the official market. The FX premium that used to be as high as 60 per cent has largely disappeared.

Our past indiscretions are still haunting us though. A lot of it is historical while we also have self-foisted issues. Nigeria became the world’s biggest importer of French Champagne. We became the world’s largest importer of Toyota Landcruisers and Prado. Lekki area became the global headquarters of Mercedes Benz G-Wagons. We imported everything ‘importable’ including sand to build exotic mansions, eggs, water, toothpicks, pizzas, anything at all. We also came third in terms of foreign students, behind rich countries with huge population – China and India, just as we trooped out en masse on medical tourism, while condemning our own facilities. These are some of the quirks I point towards when people say Nigeria is defined by poverty. I say we are all complicit in the destruction of our fledgling industries. But now it looks like the tide is turning – for those who are perceptive.

But there has been some hoopla in sections of the economy – especially those who mix economic analysis with politics. Some Nigerians believe that the CBN should just slash the numbers, allow the Naira to strengthen, because ‘people are suffering’. Some point to where the naira was as at May 2023 when the Tinubu government was sworn in – ₦470 officially and ₦800 unofficially. These comments have necessitated this article. In the first place, the key reason for the naira recalibration in 2023 was to eradicate the unnecessarily large arbitrage between the official and unofficial rates. A former CBN Governor stated that there were people who sat in their gardens and made billions just for knowing someone in the central bank who could allocate huge amounts which they bought at ₦470 and offloaded in the market at ₦800. These connected folks smiled to the bank at the expense of the rest of us. Meanwhile, it was an onerous task for legitimate businesses to obtain the foreign currency for their imports. Even students suffered before they could remit school fees. Meanwhile, over 6,000 Bureaux de Change existed officially, with thousands more operating under the radar. Every ex-banker carried 3 BDC licenses in their laptop bags with which they obtained cheap dollars which they offloaded at black market rates. We shouldn’t forget so soon.

So, when we ask for a strengthening of the Naira we are craving the locust years; the years of great waste. We are also trying to dissipate the gains of the discipline entrenched in our forex market in the last three years.  Nigeria has hit an inflection point, and we have seen some necessary behavioral changes this time. Some of us have been trying to open the eyes of our people to the gains of the Tinubu reforms. We shouldn’t be flippant. We shouldn’t desire a return to the past so that we can continue with shenanigans against our country. Like the Apostle Paul asked of the Romans in Romans 6:1, ‘Shall we continue in sin and expect the grace to abound?’. And he answered in Romans 6:2, “God forbid”. I urge Nigerians to try and look past what benefits them and not the collective. Let us think for Nigeria and her future.

There is a theory in Economics called the ‘Marshall-Lerner Condition’. It basically says that for a country to benefit from a weaker currency, its exports must be price-elastic. This means that when the country’s currency weakens, other countries should buy more of their exports. The reason why Nigeria’s exports are growing today and why we have posted over 30 per cent increase in non-oil exports (in dollar terms) back-to-back for two years at least, is because this theory is working for us now. We hit that inflection point, and our export customers took notice. We are not only exporting commodities. Nigeria is exporting solar panels, ATM Cards, cars by Innoson and other local producers, belts and shoes from Ariaria to the world, leather from Kano tanneries to the world, technology from our unicorns, finance from our banks and fintechs who dominate parts of Africa, fast-moving-consumer-goods from the likes of Daily Needs, Indomie, Wemy Industries and many more. In fact, we need to show great respect to these industries. It takes a great deal of concentration, sacrifice, deferment of gratification, coordination, risk management and control to run a factory successfully for one day.

I decided to ask AI for a list of companies that export out of Nigeria to African nations and elsewhere. I think we don’t encourage them enough and there is a need to counter those who only push bad news about the Nigerian economy. There should be a deliberate push against negative narratives – including from pressure groups who regale us with dying companies. Let us spotlight the people doing the heavy lifting and begin to show the ramifications of the Nigerian economy. Here is the list I got:

1. Dangote Group: Exports household staples like sugar, pasta, and seasoning across West and Central Africa.
2. Nestlé Nigeria Plc: Exports popular food and beverage brands (e.g., Milo, Maggi, Golden Morn).
3. BUA Foods Plc: Exports refined sugar, pasta, and flour to neighboring African countries.
4. Nigerian Breweries Plc: Exports malt and alcoholic beverages.
5. Unilever Nigeria Plc: Exports home care, personal care, and food brands.
6. Guinness Nigeria Plc: Exports its stout, beer, and non-alcoholic malt brands to African markets.
7. Cadbury Nigeria Plc: Exports beverages like Bournvita and candy to West Africa.
8. Flour Mills of Nigeria (FMN): Exports packaged foods, pasta, and sugar.
9. PZ Cussons Nigeria Plc: Exports soaps, detergents, and baby care products.
10. NASCON Allied Industries Plc: Exports refined salt and allied consumer goods.
11. Nasco Plc: Exports Sugar Cubes, Cornflakes, Biscuits and Household Items to African countries
12. Dufil Prima Foods: Exports Indomie noodles to several African nations.
13. Promasidor Nigeria Limited: Exports milk powder (Cowbell), seasoning, and beverages.
14. Chi Limited: Exports fruit juices and dairy products (Chivita, Hollandia). Seven-Up Bottling Company: Exports soft drinks and bottled water.
15. FrieslandCampina WAMCO Nigeria: Exports dairy products like Peak Milk.
16. UAC of Nigeria Plc (UAC Foods): Exports snacks, ice cream, and packaged food items.
17. Rite Foods Limited: Exports carbonated soft drinks and sausages.
18. Elafoods: Exports breakfast, noodles, and beverage brands to African diaspora and retail markets.
19. Feco Foods Industries Limited: Packages and exports packaged staple foods to African stores and restaurants.
20. Ghadco Nigeria Limited: A wholesale manufacturer and distributor that supplies consumable FMCG goods into the wider African market.
21. Daily Need Industries – Toothpastes, Hygiene and Pharma products to African countries
22. Emzor Plc – Exports of pharmaceuticals to over 27 African countries
23. Wemy Industries – Baby and Adult Diapers, other towels and pads to African countries.
24. Daraju Industries Limited: Exports MyMy red gel toothpaste and Fressia variants to Ghana etc
25. Colgate-Palmolive (Tolaram Group): Uses Nigeria as their central distribution hub for neighboring African countries.
26. African Consumer Care Limited (AFCC): A subsidiary of Dabur International, AFCC produces the Dabur range of toothpastes in Nigeria for the African market.
27. Aspira Nigeria Limited: Based in Kano, this company produces OraCare+ toothpaste and exports its wide array of personal care products into the West African hinterland.
28. Z-Tannery Limited: Located in the Challawa Industrial Estate, Kano this company takes raw animal hides and processes them into high-quality finished leather suitable for international fashion and skin trade markets in Europe and Asia.
29. Mamuda Foods Nigeria Limited: Also based in the Challawa Industrial Estate, a major food processing facility that manufactures and exports biscuits, wafers, and other confectionery products.
30. Gongoni Company Limited: Located in the Sharada Industrial Estate, they manufacture and market a wide range of household and FMCG finished products, including insecticides, air fresheners, cosmetics, and detergents.
31. Loquat Classic Nigeria Limited: Operating from the Sharada Industrial Estate, they process raw agricultural commodities and manufacture finished leather goods for export, alongside trading spices and seeds.
32. Innoson (IVM): Nigeria’s leading indigenous automaker. They have secured multi-million naira export deals, such as supplying 400 vehicles to Mali-based transport companies and exporting to Ghana and Senegal.
33. Proforce Limited: Based in Ogun State, this specialised manufacturer produces and exports Mine Resistance Ambush Protected (MRAP) vehicles and armored tactical cars to African nations like Chad, Rwanda, Ghana, and Niger.
34. Levene Photovoltaic Technologies (LPVT): Partnering with the Rural Electrification Agency (REA), LPVT became the first major Nigerian firm to export locally manufactured, TÜV-certified solar panels to neighboring countries, most notably Ghana.
35. SecureID Limited: Based in Lagos, this is the first EMV-certified smartcard manufacturing plant in Sub-Saharan Africa. They manufacture high-security payment cards (Visa, Mastercard, Verve) and supply financial, telecom, and government sectors across over 20 African countries.
36. CardCentre Nigeria Limited (CCNL): A subsidiary of Chams HoldCo, located in Lagos, it was one of the first smartcard plants in West Africa. They specialise in designing, printing, and personalising PVC ATM and debit cards, exporting their solutions to numerous African nations.
37. Electronic Payplus Limited (Epayplus): Headquartered in Lagos, they provide smart card manufacturing, personalisation, and comprehensive electronic payment solutions for the banking sector.
38. CardForté: A local card solutions and distribution firm that supplies MasterCard, Verve, Visa, and UnionPay products to financial institutions

Whereas some of these companies are conglomerates operating from Nigeria, many are fully indigenous. So, for the sake of these companies and many more who are busy grinding away and employing Nigerians in millions, I say we should maintain current policy and not be swayed by the siren song. These companies employ millions of Nigerians, no matter what many idle pseudo-analysts who say Nigeria has collapsed believe. The truth is that current reforms has refocused us on our economy and has enabled a good number of Nigerians to do business successfully within Nigeria. The truth is that naysayers are wrong and these indices expose them.

Therefore, beyond looking for the ‘true value’ of the naira (which at best will change daily in a transparent market), I suggest that we get obsessed instead with the ‘productive value of the naira’; which is that value that keeps us engaged, productive, and focused on our own economy. This is the value that discourages us from being just another import economy. We have the population here to support our industries. And we have the benefit of the African Continental

Free Trade Agreement (AfCFTA) which has really started to power up – perhaps in reaction to the protectionist policies of Mr Donald Trump. I also think we must constantly remind ourselves of the ‘marching orders’ by the World Bank, for countries to try and industrialise if they can – after many decades where the Bank had opposed industrialisation for African countries like ours. The temporary inconvenience of finding imported products more expensive while we have local substitutes should be borne with equanimity.

I close by giving us a chain reaction that could happen if we suddenly strengthened the naira overnight. This is from a Facebook post I made on same subject:

1. We will import more, travel more, go to school abroad and never return, go for healthcare abroad just for fun.
2. We will ignore those made-in-Naija products we have started to buy.
3. Small companies who now get patronised sometimes ahead of expensive conglomerates will lose business and fold up.
4. The QUIET beneficiaries of Tinubu’s reforms – who have sometimes queued behind those saying things have got worse – will find their real voices if current advantages disappear.
5. Nigerian exports which have grown across the board at 40 per cent will slow down as they become more expensive …especially commodities, JetA1, and manufactures like our solar panels which we are selling into West Africa and USA, and our fast-moving consumer goods that go into Africa.
6. Those UK universities like Coventry and Birmingham, which are planning a branch in Nigeria, or Kings College which is collaborating already with the Abuja-based African Medical Centre of Excellence, or The Charterhouse School in Lekki, including The Rugby School at Eko Atlantic will have no incentive to remain as we start pouring money abroad all over again. Nigeria reversed spending for foreign education by 84 per cent in Q1 2024, marking a turning point, and for foreign health by a whooping 96 per cent in the first quarter of this year. We must continue down this path.
7. Our imports, which have gone down 30 per cent, will rise again. This is the path of laziness. The 14 straight quarters of TRADE SURPLUSES under President Bola will stop.
8. Our Capital Account which has seen positive Balance of Payments for three years, will shrink into negativity.

So, please lets continue to build that muscle. Naira may ramp gradually and become stronger based on our outputs. In time, we shall achieve ₦500=$1, but we must continue building the fiscal, monetary, industrial, and mental muscles that we are building today.

‘Tope Fasua is the special adviser to the President on Economic Matters.