President, Nigerian Economic Society (NES), Professor Ben E. Aigbokhan participated in the meeting of visiting IMF Managing Director, Madam Christine Lagarde with private sector operators and civil society associations.
The meeting which took place on January 5, 2016 at Transcorp Hilton Hotel had twenty Nigerian participants. The meeting was called for the visiting Managing Director to have first-hand assessment of performance of the Nigerian economy in the face of falling oil price and dwindling foreign resources, and to gauge what policy options are open to Nigeria to get out of the challenges in the short to medium term. Each participant was invited to state the challenges his company faces in the context of prevailing economic downturn and what policy should the government implement.
The President advocated for broadening of the nations tax base. Currently, tax revenue only accounts for 5.96% of GDP, compared to, say, South Africas 17%.
On the issue of Naira exchange rate which the visiting Managing Director advised should, where possible, be allowed to depreciate, the President advised that in determining whether and when it would be possible to devalue the exchange rate or allow it to depreciate, there would be the need to take into account prevailing import and export fundamentals. Non-oil exports account for 7.4% of total exports, manufactured exports account for 3.4%, and agricultural exports 3.00% in 2013 and 2014. Meanwhile, import elasticity is -2.00, with weighted average of -1.32 and standard deviation of 11.40, compared to, say, Ghana -1.54, -1.09 and 4.32 respectively.
Taken together, the picture is that Nigerian economy does not stand to benefit in any significant way from cheaper export price occasioned by naira devaluation, and may be hurt more by expensive import prices resulting from devaluation, at least in the short term.
Professor Ben E. Aigbokhan