Segun Showunmi, a member of the All Progressives Congress (APC) presidential campaign council, has faulted a claim by Pat Utomi that Peter Obi, presidential candidate of the Nigeria Democratic Congress (NDC), will strengthen the naira to N500/$1 if elected president.
In a statement on Friday, Showunmi described Utomi’s
argument as “an elementary misunderstanding of exchange-rate economics and the
mechanism of price formation”.
In a post on X, Utomi, a political economist and NDC
chieftain, said the proposed exchange rate target is part of the economic
agenda for Obi’s presidential campaign.
He argued that strengthening the naira from N1,350 to N500
would help curb inflation, reduce poverty and improve the purchasing power of
Nigerians.
According to him, the adjustment would be complemented by
investments in security, electricity and road infrastructure, alongside
structural reforms to improve market competitiveness.
‘CONFUSING POLITICAL ASPIRATION WITH ECONOMIC FEASIBILITY’
Reacting, Showunmi dismissed the argument as “a textbook
example of confusing political aspiration with economic feasibility”.
“The fundamental fallacy is the assumption that an
administrative or politically declared appreciation of the naira from ₦1,350 to
₦500 per dollar will automatically translate into a 50% reduction in the prices
of virtually every essential commodity,” the statement reads.
The APC-PCC member argued that an exchange rate is not an
instrument government can arbitrarily dictate without consequences.
“It is a price influenced by foreign-exchange supply and
demand, productivity, export earnings, capital flows, monetary conditions and
confidence in the economy,” he said.
“Where is the additional foreign exchange coming from? What
will finance the proposed intervention? How will the authorities sustain the
new rate if market demand for dollars exceeds available supply? What happens to
reserves, import demand, domestic production and export competitiveness?
“These are not peripheral questions. They are the
fundamental questions of macroeconomic policy.”
He said the assumption that the prices of essential
commodities such as yam, garri, plantain, eggs, chicken, bread, rice and cement
would all drop by 50 percent was “even more troubling”.
He said the commodities have fundamentally different cost
structures, adding that their prices depend on domestic agricultural
productivity, imported inputs, energy, labour, transportation, storage,
financing and distribution costs.
“A stronger naira may reduce the cost of imported inputs,
but it cannot automatically halve the cost of domestically produced
commodities,” he said.
Citing the cement illustration in the proposal, Showunmi
said the figures do not add up.
According to him, cement priced at $10 would cost N5,000 at
N500 per dollar, not the N2,000 suggested.
“To arrive at ₦2,000, the authors have additionally assumed
a 60% reduction in the dollar-denominated price. Where is the economic
justification for that assumption?” he asked.
He said the error is more than “a minor arithmetic
oversight” and “exposes the absence of a coherent pricing model”.
Showunmi also warned that excessive currency appreciation
without commensurate productivity gains could hurt the local industry.
He said the key question is whether the proposed rate is
consistent with Nigeria’s productive capacity and external-sector fundamentals.
According to him, a serious economic manifesto must explain
how its policies would deliver the promised outcomes, including its
assumptions, empirical evidence, fiscal implications, implementation timelines
and measurable performance indicators.
He noted that while Obi’s goal of cutting the cost of living
and lifting millions out of poverty is “entirely legitimate”, it could only be
achieved through “sustained productivity growth, agricultural transformation,
industrial competitiveness, reliable electricity, infrastructure, security,
employment creation and sound macroeconomic management”.
“The naira should become stronger because the Nigerian
economy has become stronger, not because somebody has decided that ₦500 to the
dollar would make an attractive manifesto headline,” he added.
Advertise on NigerianEye.com to reach thousands of our daily users
No comments
Post a Comment
Kindly drop a comment below.
(Comments are moderated. Clean comments will be approved immediately)
Advert Enquires - Reach out to us at NigerianEye@gmail.com