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10-Point Opportunities For Nigeria In Covid-19 (D)

Business Re-Engineering Opportunity

Covid-19 has shaken many businesses to their very foundation. Unfortunately, many businesses (especially small businesses) might close down or cease to operate as a direct consequence of the pandemic. While interest rates by commercial lenders continue to accumulate, many projects are shut down or unable to generate revenue to settle mounting debt obligations. Revenue levels for a few firms may fall below break-even points. For service firms, the usual cost-cutting exercise begins with staff rationalization or better still “right-sizing” (in many cases out of panic and based on wrong assumptions).


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Yet in all of this, Covid-19 challenges many businesses to re-invent, reengineer, rebrand, and regenerate themselves. Not a few businesses are currently adopting agility, innovation, and creativity in their renewed business models. New normal is the way forward now. Maintaining lean physical operations, working from home, exploring digital meetings and engagements, among other transformations are the order of the day.

Even the supply chain is radically changing. Technology is urgently deployed by hitherto analogue businesses to improve their processes, systems, and people. Every business manager must take advantage of the new normal to re-jig and re-tool their businesses. Key question for every business is: what can you do differently?

Fastracking the Route to the Export Market

Due to the impending scarcity of foreign exchange occasioned by the Covid-19 on the Nigerian economy – as a result of the crude oil price crash – there is an urgent need to revisit, in a more organized manner, the issue of diversifying the Nigerian economy away from oil revenue. There is no doubt that Nigerian businesses have a great deal of opportunities for export in various sectors, particularly agriculture (crop production, animal husbandry, and agro-processing), manufacturing, financial services, entertainment, tourism, education and training, among others.

However, one major obstacle in generating sufficient activities in the non-oil export segments of the economy remains the seeming “mystery” surrounding the export process in Nigeria. In addition to the bureaucracy in the export processes in Nigeria, there are also issues with lack of education and training which expands knowledge and facilitates the export processes. Many businesses – especially small businesses – lack the requisite skills to process the export of their commodities or services.

With Covid-19 pandemic, Nigerian policy-makers must make every effort to enhance the knowledge, skills, and processes for the export of goods and services from Nigeria without undermining quality. Resources must be directed towards aggressive campaigns to promote and facilitate export of especially non-oil related goods and services. The guidelines, charges and tariffs for export must be such that provide incentives for exporters. This is critical for generating alternative dollar liquidity in our foreign exchange markets and for driving a stronger balance of payment position for the economy.

Strategic Devaluation of the Naira

Out of national pride, not many nations are comfortable devaluing their currency even when they are faced with serious foreign exchange supply constraints. In Nigeria, we have maintained a perpetual policy of price control in our FX market even at the cost of constantly depleting our external reserves at the altar of national ego. A recent report noted that the Central Bank of Nigeria spent over USD43.5billion intervention funds in the various segments of the FX market over a 15-month period between October 2018 and December 2019 – in the eventual futile efforts to defend the price of the Naira against the US Dollars. Where are we today?


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Nigeria has also failed over the years to maintain a single rate system in our FX market with the prevailing multiple exchange rate system fuelling round-tripping, corruption, and gross inefficient allocation of the very scarce FX resources. And despite the CBN’s emotional drive to keep the local currency value at a targeted level, we have always lost control and forced to devalue or watch the currency depreciate grievously in times of crisis – when government’s capacity to keep prices in control fail woefully. And this always happens once there is a shock or crash in the global crude oil prices. Always!

It is however important to note that many nations have used strategic devaluation to ward off supply side constraints, improve budget funding, drive export growth, and generally attract huge foreign direct and portfolio investments. While devaluation would usually lead to negative consequences in certain economic objectives (like inflation) in the short run, the long-term benefits, if the policy is well implemented and managed are usually very encouraging for economic growth and development. 

In 2016, Egypt faced the same FX supply challenges with Nigeria, but unlike Nigeria, they took the hard decision to devalue the Egyptian Pounds (also so they could access some IMF intervention loans). While this caused inflation to spike to about 33 per cent at the time, the country’s inflation has now fallen back to a single digit while they now attract the highest level of foreign direct investment in Africa with a stable exchange rate. Meanwhile, Nigeria still struggles without remedy. Japan is also another country that has consistently used devaluation to boost their export volumes over a long period of time.

The Nigerian Central Bank now has another wonderful opportunity to end the disastrous haemorrhage in our FX system, remove the multiple pricing system, soften their price control stance in the FX market, and strategically drive aggressive export of certain targeted goods and services as exporters become the new kings while needless importation is curbed. Only a mad man would keep doing the same thing and expect a different result.

Conclusion

I am convinced that if Nigeria and Nigerians fully explore the opportunities in the Covid-19 pandemic – as discussed in this write-up – we would eventually come out much stronger from the crisis. Meanwhile, to fully harness these opportunities would undoubtedly require bold, dynamic, transparent and transformational leadership at all levels. The way the current Nigerian government handles these concerns is critical to the corporate existence and prosperity of our dear nation.

Featured Image Source: The Africa Report


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