By: Dr Akinyele Eric Dairo

Dr Akinyele Eric Dairo — Wed, 22 Jul 2020 09:57:12 +0000

The concern of the Lagos Chamber of Commerce and Industry about the uncertainty in the foreign exchange market is legitimate. The CBN has been devaluing Naira against foreign currencies, especially the US dollar by almost 25% recently. Devaluation of your country currency is literally making your people poorer in comparison to people of other countries of the world. Developing countries that managed to develop in Asia focused on three things, one of which is managing their financial market, including stabilising their foreign exchange rates. They basically did not devalue their currency against the US dollar, contrary to many external forces. This is well captured in the book Joe Studwell “How Asia Works” It responds to two of the greatest questions in development economics: How did countries like Japan, Taiwan, South Korea, and China achieve sustained, high growth and turn into development success stories? And why have so few other countries managed to do so? The countries that developed have three essential three-part formula:

– Create conditions for small farmers to thrive.
– Use the proceeds from agricultural surpluses to build a manufacturing base that is tooled from the start to produce exports.
– Nurture both these sectors (small farming and export-oriented manufacturing) with financial institutions closely controlled by the government, including stabilising foreign exchange rate and maintaining low lending interest rate of financial institutions.

This can be read from Bill Gates’ two-page summary of the book in his note – “Can the Asian miracle happen in Africa?, of December 08, 2014.

Comments on: Forex uncertainty worries businesses as CBN retains 12.5% interest rate

By: Dr Akinyele Eric Dairo