Cardoso: Nigerians Spent $40 Billion in 10 Years on Foreign Education, Medical Tourism

•Says spending worsening FX Crisis 

•Attributes short-term volatilities to arbitrage, speculation 

•Insists Nigeria at a turning point as a result of current reforms 

•Deputy Speaker: Our decisions, policies must address people’s needs

Juliet Akoje in Abuja

The Governor of the Central Bank of Nigeria (CBN), Olayemi Cardoso, yesterday  said that the growing number of Nigerian students studying abroad, growing medical tourism as well as food imports have led to the depreciation of the Naira against the Dollar.

He disclosed that over the past decade, foreign exchange demand for education and healthcare had totalled nearly $40 billion, surpassing the total current foreign exchange reserves of the CBN.

Cardoso, during his presentation at the sectorial debate organised by the House of Representatives, further disclosed that personal travel allowances have accounted for a total of $58.7 billion during the same period.

The CBN head noted that between January and September 2019, the CBN disbursed $9.01 billion to Nigerians for personal foreign travel, while food imports escalated from $2.63 billion in 1980 to $14.84 billion in 2019.

“Report projects the number of Nigerian students studying abroad to exceed 100,000 by 2022. The UK’s Higher Education Statistics Agency noted a 64 per cent increase in Nigerian students studying in the country, rising from 13,020 in the 2019/2020 academic session to 21,305 by the 2020/2021 session.

“The UNESCO’s Institute of Statistics shows the number of Nigerian students abroad increased from less than 15,000 in 1998 to over 71,000 in 2015. By 2018, this figure had reached 96,702 students, as per the World Bank.

“It is crucial to highlight that between 2010 and 2020, foreign education expenses amounted to a substantial $28.65 billion, as per the CBN’s publicly available Balance of Payments Statistics. Medical treatment abroad has incurred around $11.01 billion in costs during the same period,” Cardoso stated.

The CBN boss said that Nigeria’s annual imports, which require dollars for payment, amounted to $16.65 billion in 1980 and by 2014, the annual import expenditure had significantly surged to $67.05 billion, although it gradually decreased to $54.71 billion as of last year.

“Food imports escalated from $2.63 billion in 1980 to $14.84 billion in 2019. In 1980, more than 75 per cent of the vehicles used in Nigeria were domestically produced by companies like Volkswagen in Lagos, Peugeot in ° Kaduna, and others. Presently, over 99 per cent of the cars driven are imported, necessitating dollar payments. Similarly, in 1980, the majority of the clothing worn was sourced from Nigerian textile mills in Funtua, Asaba, Kano, Lagos, and various other towns and cities

“Today, nearly all the clothing worn is made from imported fabrics. Given the substantial demand for education, healthcare, professional services, personal travel, and similar needs, the exchange rate is bound to face ongoing pressure.

“On the supply side of the exchange rate, to bolster the inflow of US Dollars into a country, the economy must ‘earn’ these dollars through exports, whether oil or non-oil, or by attracting foreign investments.

“A robust economic foundation is essential to produce goods and services that the global market is willing to pay for in US Dollars. When such supply surpasses demand, the exchange rate appreciates, causing the price of the dollar to fall. Unfortunately, in Nigeria, the contrary has taken place,” he explained.

To underscore the interplay of demand and supply, Cardoso said that in 1980, for instance,  import expenditure stood at $16.65 billion, while our exports amounted to $25.97 billion, resulting in a surplus of $9.32 billion.

Thus, during that year, he stressed that Nigeria managed to fulfil the demand for US Dollars from its existing supply and still had over $9 billion in surplus.

 In such a situation, he said the exchange rate would not increase because similar to any commodity, its supply surpassed the demand.

According to him, from 2003 to 2013, Nigeria experienced a surplus of $331.73 billion in the economy.

This surplus of dollars, he said, would typically stabilise the exchange rate, leading to a “strong” Naira.

Regrettably, over the past 12 years, Cardoso said oil exports, constituting over 90 per cent of Nigeria’s foreign exchange earnings, have declined from $93.89 billion in 2011 to $31.4 billion in 2020.

From the aforementioned points, he argued that the genuine issue impacting the exchange rate is the simultaneous decrease in the supply and increase in the demand for US Dollars.

“However, I want to emphasise that we are now at a turning point, and the bold reforms underway across different segments of the economy, though initially challenging, are aimed at addressing these challenges sustainably.

“I am confident that positive outcomes are already emerging and will become more apparent in the near future. The dedicated and relentless efforts being made are certain to bring about significant and positive changes for our economy”

“Notably, recent reports from international rating agencies such as Fitch, Moody’s, S&P and commendations from multilateral banks like the World Bank reflect this positive trajectory, with upgrades to Nigeria’s ratings from stable to positive.

“These reports acknowledge the potential reversal of the deterioration in the country’s fiscal and external position due to the authorities’ reform efforts. While recognising the painful adjustments, they all point to a direction that will unlock much needed growth and development for our economy in the medium to long term,” he stated.

He acknowledge that despite the commendations, the concerns regarding the cost of living and currency exchange rates remain.

Indeed, Cardoso stated that this is the major topic of concern in the villages,  towns and our cities, noting that the urgency of the matter is not lost on the Central Bank.

The CBN boss while speaking on the domestic outlook said that the federal government anticipates a 3.76 per cent real Gross Domestic Product (GDP) growth in 2024, slightly surpassing the estimated 3.75 per cent for 2023.

This optimism, he said, is backed by key government reforms and the expectation of improved crude oil prices and production, which are set to drive economic growth.

According to him, inflationary pressures are expected to decline in 2024 due to the CBN’s inflation-targeting policy, aiming to rein in inflation to 21.4 per cent, aided by improved agricultural productivity and easing global supply chain pressures.

“The shift to a market-driven exchange rate was intended to create a stable macroeconomic environment and discourage currency hoarding. However, short-term volatilities are attributed to arbitrage and speculation.

“ To address exchange rate volatility, a comprehensive strategy has been initiated to enhance liquidity in the FX markets. This includes unifying FX market segments, clearing outstanding FX obligations, introducing new operational mechanisms for BDCs, enforcing the Net Open Position limit, and adjusting the remunerable Standing Deposit Facility cap,” he added.

According to him, the exchange rate is determined by the dynamics of supply and demand for a product or service, in essence, similar to the pricing of cows or cars.

On the relocation of some department of CBN to Lagos,  Cardoso said it was not political but that the CBN only implemented what has been done before now.

“We did not change anything we have always done this in order to get closer to the banks for best results,” he said.

The  Executive Chairman Federal Inland Revenue Service (FIRS), Zacch Adedeji, during his presentation at the sectorial debate said that the federal government has no plans to increase tax but to re-strategise in ways that will yield positive and more results.

“We plan to collect N19.2 trillion. We are not going to increase any tax but to re-strategise to bring more people into the tax net and that has led to restructuring. The focus of Mr. President is not to tax,  but tax return on investment,” he stated.

Also, the Minister of Budget and National Planning, Atiku Bagudu, said that the current economic challenges being faced was being looked into with a strategic plan to resolve the challenge.

“We will overcome the challenges of the moment. People will be inconvenienced, but things will get better as government implements the reforms,” he said

The Minister of Finance, Wale Edun, during his presentation said that the country is where it is at the moment due to series of economic policies over the years.

“We are where we are today as a result of series of economic policies over the years. The president has promised to take measures that will address major stumbling blocks to the nation’s economic growth,” he noted.

Edun added  that oil production has steadily increased as a result of improved security in oil producing areas and fight against oil bunkering and other criminalities in the area.

“The measures have increased investor confidence in the sector while the nation improves its crude oil output. Inflation, exchange rates fluctuations and other factors are also being addressed while agriculture is being strengthened for maximum production and non-oil sector economic diversification,” the minister added.

He maintained that as things improve, many sectors will pick up and drive the economy and further called on Nigerians to be calm, confident and have faith in the ability of the government to turn around the economy for the citizens to prosper.

The Deputy Speaker of the House of Representatives, Hon. Benjamin Kalu, said that the collective decisions of the parliament and the policy implementation of the government must impact Nigerians positively.

The deputy speaker  said that large-scale reform measures were needed to pull Nigeria out of its current daunting economic challenges and that the interconnection among the CBN, the FIRS, the Ministry of Planning, and the Ministry of Finance embodied the holistic approach which must be adopted to address the multifaceted challenges that confront the nation.

Kalu said: “As we gather in this sectoral debate with the CBN governor, the chairman of FIRS, the Minister of Budget and Economic Planning, and the Minister of Finance, it is imperative to recognise the urgency and importance of the agenda before us.

“We must also confront the stark realities of the economic, fiscal, and revenue challenges that our beloved nation, Nigeria, is currently facing”

“We are at a pivotal moment where the decisions we make and the policies we implement will impact the lives of millions of Nigerians. The reforms we envisage should not only address the immediate needs but also lay a resilient and dynamic framework that can adapt to future challenges and opportunities. These measures should stimulate growth, foster innovation, and uplift the lives of every Nigerian,” he added.

He emphasised that the essence of synergy is further subsumed in lawmakers quest for economic stability and growth and further reminded his colleagues and indeed all the stakeholders that the eyes of the people were on them with high expectations.

“As we engage in this sectoral debate, let us remember that the eyes of our nation are upon us, looking with hope and expectation for outcomes that will reinforce the pillars of our economy, safeguard our fiscal integrity, and ensure a prosperous and inclusive future for all Nigerians,” he noted.