Can made-in-Nigeria campaign ease dollar demand?

The just concluded Economic Summit in Abuja, themed Made in Nigeria, couldn't have come at a better time as foreign exchange shortage threatens to cripple Nigeria's manufacturing sector. Tundia Damah, Head of FX Trading at City, provided insights into the Forex market dynamics and discussed how the Made-in-Nigeria campaign could potentially ease dollar demand. Damah highlighted that transitioning to local products would take time and effort, as establishing factories and changing consumer preferences doesn't happen overnight. He emphasized that this shift should have started decades ago to make the process smoother. Despite the challenges, Damah expressed optimism in the medium to long term, suggesting that if the campaign is successful, local goods could become more appealing to consumers, leading to decreased dollar demand. Reflecting on a recent interview with the CEO of FMDQOTC, Damah acknowledged the self-inflicted nature of Nigeria's recession and the vital role of the FX market in addressing economic issues. However, he cautioned against solely focusing on currency fixes and emphasized the need for comprehensive solutions, including infrastructure development. Damah also analyzed recent Central Bank tactics, such as channeling funds to BDCs to stabilize the parallel market, noting that while this strategy alleviates pressure in certain segments, it may not significantly impact the official market. He further discussed the status of portfolio flows, indicating a slowdown in incremental investments but not a complete cessation. Despite ongoing challenges in the FX market, Damah suggested a radical approach of letting the currency float temporarily to establish a more credible exchange rate and attract capital inflows. He emphasized the importance of market-driven mechanisms over centralized interventions. Damah addressed concerns about potential fuel price hikes if the currency is allowed to float, highlighting that market dynamics would eventually find equilibrium. He compared fuel prices in Nigeria and other countries, stressing the need to transition away from interventionist economic policies towards a more market-oriented approach. In conclusion, Damah underscored the importance of implementing sound policy frameworks and creating a conducive business environment to stimulate economic growth, rather than relying on ad hoc interventions. While acknowledging the challenges ahead, Damah advocated for embracing market forces to steer Nigeria towards sustainable economic prosperity.