The Governor of the Central Bank of Nigeria (CBN), Olayemi Cardoso, on Tuesday, revealed that between 2010 and 2020, Nigerians spent about $40 billion on foreign education expenses and medical treatment abroad, while foreign education expenses amounted to $28.65 billion, the CBN governor said medical treatment abroad incurred around $11.01 billion.
Cardoso who revealed this at the sectoral debate organised by the House of Representatives, Tuesday, said the amount surpasses the total current foreign exchange reserves of the apex bank.
The sectoral debate/dialogue is an initiative of the 10th House of Representatives as part of its periodic Policy Brief Series. In attendance also were Minister of Finance, Wale Edun; Minister of Budget and Planning, Atiku Bagudu and the Chairman of the Federal Inland Revenue (FIRS), Zacch Adedeji.
Cardoso, while providing reasons for the nation’s volatile exchange rate, explained that the exchange rate in Nigeria has increased and depreciated due a decline in the supply of US dollars coinciding with a surge in the demand for US dollars.
Quoting recent data from UNESCO’s Institute of Statistics, Cardoso said the number of Nigerian students abroad increased from less than 15,000 in 1998 to over 71,000 in 2015. According to him, by 2018, the figure had reached 96,702 students.
“Given this data, it’s crucial to highlight that between 2010 and 2020, foreign education expenses amounted to a substantial US$28.65 billion, as per the CBN’s publicly available Balance of Payments Statistics”, he stated.
“Similarly, medical treatment abroad has incurred around US$11.01 billion in costs during the same period. Consequently, over the past decade, foreign exchange demand for education and healthcare has totaled nearly US$40 billion. Notably, this amount surpasses the total current foreign exchange reserves of the CBN. Mitigating a significant portion of this demand could have resulted in a considerably stronger Naira today.
“Personal Travel Allowances have accounted for a total of US$58.7 billion during the same period. Notably, between January and September 2019, the CBN disbursed US$9.01 billion to Nigerians for personal foreign travel.
“Continuing on the topic of the demand for US Dollars, Nigeria’s annual imports, which require dollars for payment, amounted to US$16.65 billion in 1980. By 2014, the annual import expenditure had significantly surged to US$67.05 billion, although it gradually decreased to US$54.71 billion as of last year. Similarly, food imports escalated from US$2.63 billion in 1980 to US$14.84 billion in 2019.
According to Cardoso, given the substantial demand for education, healthcare, professional services, personal travel, and similar needs, the exchange rate is bound to face ongoing pressure.
The CBN governor who said the country is at a turning point, observed that the bold reforms underway across different segments of the economy, though initially challenging, are aimed at addressing these challenges sustainably.
He expressed confidence that positive outcomes are already emerging and will become more apparent in the near future.
According to him, “while inflation pressures may persist, albeit temporarily, they are expected to moderate significantly by Q4 2024, noting that exchange rate pressures are also expected to reduce with the smooth functioning of the foreign exchange market.
He said to bolster the inflow of US Dollars into the country, the economy must earn these dollars through exports, whether oil or non-oil, or by attracting foreign investments.
He added, “The Nigerian foreign exchange market is currently facing increased demand pressures, causing a continuous decline in the value of the naira. Factors contributing to this situation include speculative forex demand, inadequate forex supply due to non-remittance of crude oil earnings to the CBN, increased capital outflows, and excess liquidity from fiscal activities.
“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 remuneration Standing Deposit Facility cap.
He noted that a robust economic foundation was essential to produce goods and services that the global market is willing to pay for in US Dollar, adding that when such supply surpasses demand, the exchange rate appreciates, causing the price of the dollar to fall.
He regretted that in Nigeria, the contrary has taken place.
Cardoso noted that while the CBN has the mandate of stabilizing the exchange rate, achieving results would necessitate efforts beyond the Bank itself and indeed to an attitudinal change of all citizens.
“Monetary policy actions are sometimes inhibited by transmission lags, nonetheless, it is expected that the policy measures implemented by the Bank will permeate the economy in the short to medium term”, he stated.
On his own, Finance Minister, Wale Edun , said the Federal government was achieving positive results with measures rolled out to address the economic challenges.
According to him, Federal allocation to states and local governments have increased with the blockage of wastage and removal of subsidy.
“Measures have been taken and there have been positive results. If you look at the government revenue, there is an increase. Palliatives and interventions have also been rolled out.
“The whole measure we are taking is resonating around the world. With the application of technology, we have brought in government funds lying in MDAs to the consolidated revenue account. What happened is that we waited for a long time to turn the corner. Let us be rest assured that Nigeria has turned the corner in economic policies.”
Also in his presentation, the Chairman of the Federal Inland Revenue Service (FIRS), Mr Zacch Adedejo, said though the agency set a target to collect N19.4 trillion in tax this year, it won’t introduce new tax.
He noted that the target represents a significant increase of 56.9 per cent from the previous year’s actual revenue and 67.91 per cent from the previous year’s target
According to him,”We have the target to collect N19.4trn and given the situation, we are not going to introduce new tax. Without increasing the tax rate, we will bring more people to the tax net. That is why we have to be more customer centric. We want to improve our expertise on the way we collect tax from Nigerians.
“This will help to reduce multiple taxes. As an agency, we are not there only to collect tax, we are also providing economic advice and taxpayers service. We are not to tax poverty but we are to focus on prosperity and return of investment.”