The Central Bank of Nigeria has said Nigerians’ spending on foreign Education, healthcare and personal travels gulped to over $98bn in 10 years.
The Apex Bank Governor, Olayemi Cardoso, disclosed this while addressing the House of Representatives on Tuesday, February 6, in response to lawmakers’ inquiries about the factors behind the rapid depreciation of the naira in the last few weeks.
Cardoso’s argument hinged on the fact that a major reason the naira had become weakened over the years was the growing distaste for locally manufactured goods and rendered services.
He argued that the foreign exchange market was facing increased demand pressures, causing a continuous decline in the value of the naira.
According to him, factors contributing to this situation include speculative forex demand, inadequate forex due to low remittance of crude oil earnings to the CBN, increased capital outflows, and excess liquidity from fiscal activities.
In contextualising the problem, Cardoso noted that Nigeria’s annual imports, which require dollars for payment, amounted to $16.65bn in 1980.
By 2014, the annual imports had significantly surged to $67.05bn, although it gradually decreased to $54.71bn as of last year.
Similarly, food imports escalated from $2.63bn in 1980 to $14.84bn in 2019.
Adding all the figures, Nigerians spent about $98bn on foreign trips, medical tourism and overseas education, a figure the CBN governor said was more than the total foreign exchange reserves of the Apex bank.
Cardoso said, “In 1980, our import expenditure stood at $16.65bn, while our exports amounted to $25.97bn, resulting in a surplus of $9.32bn. Thus, during that year, we managed to fulfil the demand for dollars from our existing supply and still had over $9bn in surplus. In such a situation, the exchange rate (the value of the US Dollar) would not increase because, similar to any commodity, its supply surpassed its demand.”
Also contributing to the free fall of the naira, per the apex bank, has been a significant decline in Nigeria’s oil revenues.
“Moreover, from 2003 to 2013, we experienced a surplus of $331.73bn in the economy, with oil exports alone contributing over $798bn. This surplus of dollars would typically stabilize the exchange rate, leading to a “strong” naira.
“Regrettably, over the past 12 years, oil exports, constituting over 90 per cent of our foreign exchange earnings, have declined from $93.89bn in 2011 to US$31.4bn in 2020,” Cardoso added, while noting that monetary policy actions were sometimes inhibited by transmission lags.
“It also seems that the task of stabilising the exchange rate, while an official mandate of the CBN, would necessitate efforts beyond the bank itself and indeed to an attitudinal change of all our citizens,” he added.