e-wisdom daily

Pat Utomi and his utopian ideas wrong again. I have read this economic proposition with considerable concern. It is 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. This is an elementary misunderstanding of exchange-rate economics and the mechanisms of price formation. An exchange rate is not an instrument that 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. A sustainable appreciation must be earned through improvements in these underlying fundamentals. 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. Even more troubling is the assumption that yam, garri, plantain, eggs, chicken, bread, rice and cement will all experience identical 50% price reductions. These commodities have fundamentally different cost structures. Their prices are influenced by varying combinations of 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. The cement illustration is particularly revealing. If cement costs $10 at ₦1,350 per dollar, its equivalent at ₦500 per dollar is ₦5,000, not ₦2,000. 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? This is not a minor arithmetic oversight. It exposes the absence of a coherent pricing model. There is also a failure to appreciate the potential consequences of excessive currency appreciation without corresponding productivity improvements. Domestic manufacturers could become less competitive, imports could become relatively more attractive, and the country could undermine its own industrialisation and export-diversification objectives. The most important question is whether the proposed exchange rate is consistent with Nigeria’s productive capacity and external-sector fundamentals, not whether it is politically attractive. A serious economic manifesto must explain the transmission mechanisms through which its policies will deliver their promised outcomes. It must provide assumptions, empirical evidence, fiscal implications, implementation timelines and measurable performance indicators. It cannot simply announce a preferred exchange rate and then arbitrarily halve the prices of commodities. Economic policy is not an exercise in wishful arithmetic. The ambition to reduce the cost of living and lift millions of Nigerians out of poverty is entirely legitimate. But the way to achieve this is 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. There is a difference between promising prosperity and demonstrating the economic competence to deliver it. This proposal has yet to demonstrate the latter.