Premise: Ndubuisi Ekekwe was never a fan of the floating of the Naira and I have explained my reason via many posts. You cannot float Naira when you cannot fix the supply side of the US dollars in Nigeria. Across all indicators, the demand and supply imbalance of US dollars in Nigeria is the root cause of why Naira is struggling. Another component is the overdue forward payments of $6.8 billion.
The challenge now is how to fix this Naira, relying on public information We The People have access to. Here are my suggestions:
Option #1: A Partnership with Nigerian Diasporas
Tekedia Mini-MBA edition 16 (Feb 10 – May 3, 2025) opens registrations; register today for early bird discounts.
Tekedia AI in Business Masterclass opens registrations here.
Join Tekedia Capital Syndicate and invest in Africa’s finest startups here.
Go to the Diasporas and unveil an opportunity to raise $10 billion over the next 6 months via a special national vehicle project, syndicated across US, Canada, EU, and the UK. Raise that money and offer to pay an 8% annual interest rate. Kickstarting this process will cool the temperature in the FX ecosystem.
Nigerians remitted about $20 billion in 2022 via the official channels: “According to a report by the World Bank, Africa’s most populous nation Nigeria, accounted for the highest remittance flow into sub-Saharan Africa in 2022. Remittance flow into the region reached $53 billion, and Nigeria accounted for 38% ($20.1 billion), followed by Ghana and Kenya with $4.7 and $4.1 billion respectively.” If you include non-official and non-border crossing remittance (i.e. internal swaps like pay Naira in local account, and I pay USD to where you need it in America), you can have close to $40 billion in 2022.
To make this partnership work, get the African Development Bank and Afreximbank to guarantee the investment, while you put a future crude sale of $10 billion handed over to the banks. In other words, the banks will guarantee to pay the principal and interest to the Diaspora investors, and Nigeria will sign-off on future crude oil sales to the banks.
Quickly, Nigeria will boost crude oil production to at least 2 million bpd, from about 1.2m bpd today, which remains within our OPEC quota. That extra production and closing all leakages will ensure the interest payment is covered while providing room to have additional funds.
We will take from the $10 billion and pay the $6.8 billion overdue forward payments. Another $1 billion will be invested to digitize the upstream oil & gas sector, making it impossible for leakages to happen, through technology. Another $1 billion will go into community-focused independent power systems which become a pool of funds, to support communities and states, on their electricity playbooks. That will jumpstart production in the nation. The balance will be put to get the national refineries back to full production.
And The Key Part: During repayment, the principal and interest should be paid into domiciliary accounts which will be opened automatically at the point of this investment, in Nigerian banking. The investors can decide to repatriate their funds, but I model that more than 80% will re-invest the funds in Nigeria with close to 40% leaving the funds in the dorm accounts, helping in the total USD supplies.
The whole construct of this option will get Naira back to N500/$ within three months.
Option 2: That will come in another post. I will be sharing here.
---
Register for Tekedia Mini-MBA (Feb 10 - May 3, 2025), and join Prof Ndubuisi Ekekwe and our global faculty; click here.
Let’s look at the practicalities:
For you to be considered persuasive and believable all round, you must possess three things: good sense, good moral character, and goodwill. If you want to know the first challenge your proposition will encounter, therein lies the answers.
To the $10 billion proper, if you put $1 billion as investment in power supply across communities, that would give less than 1000MW gross, excluding distribution cost. Can this really jumpstart manufacturing when sequestered?
With over $8.8 billion gone, you are left with $1.2 billion, can this fix or modernize moribund refineries to function at full capacity? And more importantly, what happens if someone decides to blow up the refineries after they have been fixed, the money will go just like that?
Again, to push oil production from around 1.2mbpd to 2mbpd will cost how much in investment? No allocation for it, or will blocking oil theft add 800kbpd? Are we losing as high as 800k barrels daily to oil theft? You require billions of dollars in investment to move from 1.2mbpd to 2mbpd, so you may have to factor that.
Anything is possible, but don’t forget my first paragraph, it holds the key to everything, else you are not getting the dollars, to begin with.
Francis Oguaju, ” if you put $1 billion as investment in power supply across communities, that would give less than 1000MW gross, excluding distribution cost.” – Nigeria does not have generation problem. We have distribution problem and $1b can help.
Also, Nigeria ten years ago was doing more than 2.3m bpd. Those facilities remain. Manage the stealing and the numbers will rise.
Sorry my dear, those facilities have issues and government has refused to fix it.
And my dear $1b won’t fix them
Another fact you need to know is timing… even if the resources to fix them is available it can’t all be fixed in 3 months
Thank you for sharing these truths, which I have learned from the diaspora, energy industry, and investors over the past decades.
While I applaud the option of seeking funds from the diaspora community, I differ on the approach to the utilization of such funds.
I’ll rather tie such funds to specific projects that have the potential to generate forex or reduce forex spend ( import substitution) or specific infrastructure projects with Build, operate and transfer (BOT) clause.
Identify competent technical artners that would drive these projects and define jurisdiction for adjudication of disputes away from our courts and ensure such projects are devoid of government influence.
Refineries or power plants with captive offtakers, targeted at our industrial estates,. These would remove the need for huge transmission and distribution infrastructure.
Agro allied business that can explore the value chain of cassava for the export market is advisable or any other crop for which we have competitive advantage. Eg Beans, Cocoa,sesame seeds and cashew
These
Prof. Your proposition is laudable. However, tbe biggest challenge is would be TRUST issue. Most Diasporas do not trust anybody Nigeria Government enough to make this type of investment no matter how attractive it is. Tbey beleive money would either l be diverted or stolen. Perhaps a another angle to look at it is to engage institutions like JP Morgan for examole to raise the $10billion directly from Diaspora and loan it to Nigeria Govt. Entities like African Guaranty Fund (AGF) or other DFI can offer credit guanranty. In this way, Disporas would deal directly with a respected international institution who would be responsible to pay back principal + interest. ” if Nigeria Government like ,make dem chop the money as usual. JP to go back Diasporas “. Key word here is we no fit trust 9nja government with our money o :)
Thanks for taking time to come up with solutions even if just as proposals. The positive action oriented mindset will ultimately lead to change. The lack of trust in systems can also be overcome by innovative systems. Please keep it up.
Your proposal was a fine read! Very fascinating BUT Nigeria needs God to come and fix it! HAVE YOU NOT NOTICED THAT MANY THINGS THAT EASILY WORK ELSEWHERE USUALLY Don’t WORK IN NIGERIA. Truth does not exist. Those fund you are talking about will end up in private pockets! The sharp practices is too much!Only few banks play by the rules in Nigeria! Even after fines and penalties by CBN,they go back again and pay penalty. No rule of law. No fear anywhere. Even EFCC are selective. Churches and Mosques and traditionalists are not spared! It’s something else!!!
Prof, it is very easy to proffer solutions that sound beautiful but implementing them in reality is often not that straightforward. Firstly, the remittances that are made by the diaspora are majorly for extended family sustenance, debt repayments, extended family medical bills, personal real estate investments and education of relatives. There is truly no actual idle funds available with a majority of those in the diaspora, despite the high remittance value recorded. This is a critical point to consider in attempting to generate high volume of foreign exchange from the diaspora community, in addition to the soft considerations highlighted by Francis Oguaju (Good sense, good moral character and goodwill). Secondly, Nigeria’s oil production is suffering from the impact of a weak reserve replacement ratio. Reinvestments are meant to equate at least 50% of what they are generating. Producers all over the world have a positive reserve replacement ratio, except in Nigeria and a few other countries. The Nigerian oil industry cannot secure $10bn using its future production, even if the price remains above $80/bbl for 5 years steadily because of it’s constant decline in production volumes. You need to mitigate the volumetric risk around production before you attempt ring-fencing the reserves for future production. The drop in volumes is occasioned by systemic graft (under-declaration of production volumes to avert payment of royalties), direct theft via vandalization and the typical production inefficiencies across all players, including the IOCs. Yes, I agree with your subsequent comment of injecting funds into the distribution and transmission systems in the country but even that may not also be sustainable because the tariffing structure does not allow for cost recovery. Nigerians are underpaying for electricity. All the Niger-Delta Power Holding power plants in operations, are generating and injecting into the grid at a loss. These plants operate as social generation systems. Then, the distribution is too weak because of power theft, obsolete systems and the incapacity of the operators in terms of their ability to invest massively and recover through tariffing because the electricity tariff is subsidized. You can run a quick comparison from the natural gas production cost to the generation cost and the cost of delivery to the end users via the transmission and distribution systems. I personally believe that we are too fixated with foreign exchange rates and as such, forget about how to improve our economy. What we need is simply to raise long term capital using Government’s influence and then utilize such capital to attract investments on a co-development basis, into sectors that have the potential to improve our exports (mining, industrial agriculture, IT, human capital – through education and high skill acquisition, and energy – through natural gas monetization). The scope of our solution as a nation is far beyond this comment section but I believe we are too fixated with the foreign exchange rates and that has clouded our best judgement for proper economic revival..
Thank you for sharing these truths, which I too have learned from the diaspora, energy industry, and investors over the past decades.
Good proposal but difficult to achieve based on many factors.
Lol Nigerian government can never implement these the only way to stabilize the naira is to allow it to fail to international market standard and then beginning to build our agricultural sector and then power and at the same time road Nigeria currently does not produce enough to stabilize the naira at it current level
The next best thing is do what the US has done with there oil and gas industry reduce regulations so that we can have small and medium oil drillers take a JP Morgan loan of 1 billion dollar and take an additional 5 trillion naira loan from the CBN and hand it over to the banks so they can give it to these oil companies at the same time pull out of OPEC
8% interest rate is quite high. I will be pushing for 4-5% interest rate due to FX risk. 60% of the funds will be used to fund Export oriented company that are into backward integration while 20% will be used for trade obligations of banks and the balance of 20% will be sold to BDC to reduced the pressure on FX market and stabilize supply.
8% interest rate is quite high. I will be pushing for 4-5% interest rate due to FX risk. 60% of the funds will be used to fund Export oriented company that are into backward integration while 20% will be used for trade obligations of banks and the balance of 20% will be sold to BDC to reduced the pressure on FX market and stabilize supply.
However, the Diaspora remittance by World Bank is more of estimation I will like to see the true remittance with data.
What an interesting proppsal, meanwhile it will make more since if such fund will be managed by enteral bodies, who those in diaspora can hold accountable if the fund is mismanaged.
Our Government can’t be trusted, as they lack management sense just the way they lack maintenance policies.
My solution is a bit different. One of Nigeria problems is, lack of patriotism. That one will never happen in as much as Nigeria remains. We need to find a way to dissolve the system of government and I’ll suggest Confederacy if total disintegrations would be too scary for some people. Let’s also forget about religion in government. Any one who needs to finance his or her children school fees abroad, Hospitals, abroad, should find a private way to do that. There are some commodities that shouldn’t be brought to Nigeria because of the pressure on the Naira.
Nigeria in diaspora will never trust any Nigerian government policies. Nigeria is in trouble.