Thread by @FinPlanKaluAja1

Nigeria cant eat her dollars & have it.

Naira is "tied" to fx earnings....if oil prices crash naira has weakens

Monetary options?

Devalue; allow the market determine true exchange value. FX reserves are stronger & imports fall, Non oil exports rise. Imported inflation risk

Or

"Defend" the Naira; allow the CBN determine the exchange value of the the naira. FX reserves constantly under pressure, imports rise....

Sure Nigeria can do a hybrid here and there but its really down to "devalue" or "defend"..none solves the problem completely.

CBN will prefer to defend the naira and also retain her reserves....A policy mismatch.

We have to look at this holistically. CBN alone cant "defend" the Naira. if imports fall...Naira will rise.The culprit in this matter is imports.

So the questions is how to reduce imports?

Nigeria has to find a medium and short term solution to reduce imports by either import substitution or massive local subsidies to ensure local goods are cheaper.

Take textiles. ...how is it possible i can go to China, buy Ankara, ship it, pay insurance and bank charges and it lands in Lagos cheaper than the same Ankara from a textile mill in Kaduna?

The answer is simple, Nigeria had a higher local costs so imports are cheaper...because imports are cheaper, they a high demand, thus Nigerians seek dollars to import...because imported goods sell more......because they are cheaper.

So thinking out of the box, go to Kaduna and give the textile mills diesel at N5 a litre ( manufacturing subsidy) ...their costs will drop...so no one will buy Chinese textiles because Kaduna textiles will be cheaper....

This is the same thing the West does, they subsize farmers so their food is cheaper, and exported.
Boeing and Airbus jets are locally subsidized.

However note....subsidize LOCAL production. ...

So in closing, get imaginative and expand the response, dollar restrictions wont help the Naira...its just speed bumps. ..the ONLY real way to have a "strong" Naira is reducing imports.

(If Nigeria needs a strong Naira is another topic)

Its our problem, we can fix it