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Nigerian businesses
need to focus on the exchange rate, just as government needs to focus
on foreign reserves management during the remaining period of 2010,
declared Doyin Salami, a member of the Monetary Policy Committee (MPC)
of the Central Bank and lecturer at Pan African University.

He added that the
political transformation of President Goodluck Jonathan will determine
how the economy will fare in the remaining part of the year.

Speaking at the
August breakfast meeting of the Nigerian-South African Chamber of
Commerce, held in Lagos yesterday, Mr. Salami said the exchange rate of
naira against the dollar will be the biggest issue for business
managers to monitor.

“If foreign
reserves stabilise, there may not be pressure on the naira. If not,
depletion of the reserves may not be good for the economy. The biggest
points will not be interest rates, but exchange rate. Reserve
management is going to be at the heart of stability going forward and
management of exchange rate is going to be key,” he said.

Nigeria’s foreign
reserves, which stood at $62.24 billion in mid-May 2008, dropped to $36
billion on July 6 this year, its lowest level in over two years. It
climbed to $38 billion on Tuesday. Naira currently exchanges for
N148.75 to the dollar on the CBN official window, while the benchmark
interest rate is currently 6 percent.

Election spending, job creation

Salami said
election spending would have economic impact in the medium to long
term. He said there is likely to be an improvement in demand for credit
between now and January, which will be driven mostly by electoral
considerations. For this, he said the Central Bank would face a
daunting challenge managing the fallout of such venture, and the
attendant repercussion on the private sector.

He explained that
government would need to concentrate on job creation in order to
empower the youth, adding that the economy has grown in the last five
years without a commensurate creation of jobs.

“Issues of jobs and
youth empowerment have to be planned 10 to 20 years. If the economy has
to create jobs, key impediments have to be taken away,” he advised.

Such impediments
include restructuring the education sector so that institutions can
churn out employable graduates. “Not only do we have unemployment, we
also have the unemployable. So even if jobs are created, where are the
people to be employed?” He advocated for massive retraining of youth so
that many of them can be useful to the economy.

Razia Khan, Head of
Macroeconomics, Regional Head of Research, Africa at Standard Chartered
Bank, London, said in a recent report that the amount of liquidity that
has been pumped into the system, with spending ramped up dramatically
in this year’s budget, has decreased Nigeria’s savings.

Mr. Salami said
that solving the problem of power may not necessarily translate to
growth as expected unless there is efficiency in other sectors of the
economy.

“We need industries that would rely on agriculture that is high quantity, high quality, all year round.”

One way of doing
this, he added, is a review of the Land Use Act, which should be taken
out of constitutional legislation so that it becomes a policy issue.

“The Land Use Act
must be reorganised such that it makes verification and transfer of
title easy. Currently, farmers cannot pledge land, which is why banks
are not willing to finance agriculture,” he stated.

He said it is
ironic that agriculture, which contributes about 42 percent of the GDP,
does not attract credit due to the distortion in the Land Use Act,
which requires the consent of the governor before deed of title is
issued.