Soludo urges FG to keep naira competitive to lift exports

Former Central Bank of Nigeria (CBN) governor Soludo has advised the Federal Government to keep the naira competitive to boost exports. He said Nigeria should target a real effective exchange rate (REER) undervaluation of at least 25 percent to 30 percent year-on-year over the next 10 years and warned against celebrating excessive appreciation of the naira.

The REER measures a country’s currency strength against a basket of foreign currencies, taking inflation into account to reflect real purchasing power. Soludo spoke on Monday during a panel session titled "Growth That Works: Building a New Economic Accord for Nigeria" at the 32nd edition of the Nigerian economic summit (NES).

Stability, reforms and local demand

Soludo said macroeconomic stability is important but should not be taken for granted. He said Nigeria needs to sustain reforms while building a more productive economy. "The macroeconomic framework, the stability that is back must never be taken for granted," he said.

He said lasting economic progress depends on consistently implementing sound policies rather than expecting rapid results from short-term interventions. He also urged Nigerians to increase consumption of locally made goods, saying stronger domestic demand could create millions of jobs. "If we all eat and wear what we produce in Nigeria, more than 10 million jobs will be created," he said. Soludo cited his use of locally produced Akwete fabric as an example of how demand for domestic products could support producers and employment.

Nine new export products since 2007

Chema Triki, co-founder and managing director of Growth Teams, said Nigeria added only nine new products to its export basket since 2007. She said Nigeria ranks 141st out of 145 countries in economic complexity, a measure of the knowledge and capabilities reflected in the products a country makes and exports.

She said more than 85 percent of Nigeria’s exports are oil and oil-related products, leaving the economy vulnerable to external shocks and limiting its ability to create jobs through manufacturing. "What that means is that in 17 years, Nigeria has learned to export only nine new products," she said. "Export is important because it’s the best way to discipline firms to learn, but also to discipline your political economy from not protecting too much uncompetitive firms."

Triki said exporting goods forces businesses to improve product quality, adopt new technologies, and compete with international producers. She said access to foreign markets also allows businesses to expand beyond domestic demand, noting that Nigeria’s large population does not automatically translate into a market with sufficient purchasing power. Using Samsung as an example, she said the South Korean company moved from agricultural trading into textiles and electronics before becoming a major technology brand. She said Nigeria needs to help local businesses develop the capacity to produce goods for international markets rather than depend largely on domestic consumption.

Infrastructure and protection limits

Stefan Dercon, professor of economic policy at the Blavatnik School of Government, University of Oxford, said businesses need stable macroeconomic conditions, reliable infrastructure, and predictable costs to compete. He identified electricity, logistics, and efficient ports as important requirements for improving the competitiveness of Nigerian products.

Dercon warned against protecting local industries indefinitely, saying government support should help businesses become competitive rather than keep them dependent on protection. "You can’t keep them 40 years an infant. You can’t keep them protected in the same way," he said. He also said governments need the capacity to ensure that businesses receiving protection or other forms of support meet agreed performance targets.

For the naira, Soludo’s advice points to a policy focus on export competitiveness rather than a stronger currency. For consumers and businesses, the panel’s message was that local demand and export capacity must both grow to create jobs and reduce reliance on oil.