|
|
| |
| Income Sterility Of Idle Cash And Volatility Of Foreign Exchange: Nigeria's Businesses Experience
Download PDF
|
Osita, Fabian Chinedu Ph.D; Anoke, Amechi Fabian Ph.D, Akpoyibo, Gregory Akpobome Ph.D
|
Abstract:
Nigeria is a monolithic economy; with a greater chunk of her foreign exchange earnings traceable to oil. These foreign earnings have contributed little or nothing in stabilizing the volatility of the naira against the dollar in recent times because of systemic corruption, importation of virtually everything, stashing of naira / foreign currencies at home, and negligence to non-oil sectors of the economy. Idle cash stashed at homes accounts for about 85 percent of total cash in circulation based on available evidence. This idle cash which is income sterile has a significant effect on the volatility of the foreign exchange rate in Nigeria, which consequently contributes to economic sabotage. This paper is anchored on the monetary theory of Friedman (1956), which argues that the general price level of goods and services has a corresponding effect on the availability of money in an economy. Evidence abounds that, the volatility of the exchange rate of the US Dollar, attributed to the idle cash stockpiled in various homes amongst other factors are weighing down Nigeria's businesses/economy in the past three decades, and it is consequently affecting the value of the naira thereby engendering low manufacturing capacity utilization, increased unemployment, increased inflation, increased debt burden, reduced investment, and declining foreign reserves. To get it right, the government must come up with policies and reforms that will aim at reducing corruption, especially concerning advising political officeholders/top government officials on the economic implication of hoarding the naira/U.S. dollars or other foreign currencies in their homes. Diversifying the economy, encouragement of local production, and domesticated refining of petroleum would also be encouraged.
|
|
|
| | |