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5 Ways 100 for 100 Policy Will Crash US Dollar Exchange Rate in Nigeria

Last Updated on November 14, 2021 by Ope Quadri

For close to three decades, Nigeria’s economy has depended largely on the importation of finished products, even some indigenous manufacturing companies import raw materials.

To put a stop to an importation economy, the Central Bank of Nigeria (CBN) on October 25, 2021, launched “100 for 100” Policy on Production and Productivity (PPP).

The laudable policy is going to reduce demand for foreign currencies, it will not only force the US dollar exchange rate to crash in Nigeria, it will also effect a positive change in the value of Naira and gradually eliminate the implications of naira depreciation on the economy.

The 100 for 100 policy initiative coincides with the official launch of the eNaira, the first Central Bank Digital Currency (CBDC) in Africa.

Meaning of 100 For 100 Policy

100 for 100 means one hundred companies will be selected within the application time frame every one hundred days. The successful 100 companies would receive a maximum of NGN5,000,000,000 from the apex bank to boost local production and manufacturing.

For us at InfomediaNG Business Solutions, the PPP is the best in recent times aimed at, not just boosting local production and reducing importation, but the transparent financial support and the single-digit credit facility the apex bank would be providing for local manufacturing companies in Nigeria.

CBN is saying it’s ready to give a local company NGN5 billion to source raw materials locally, show evidence of exports of your finished products, show evidence of a reduction in the importation of materials, and capacity to create jobs for the millions of youths.

5 Long-Term Impacts of 100 for 100 Policy on Forex

Policy on Production and Productivity is one of the perfect long-term policies investment and financial analysts, and economists had been clamouring to boost production and productivity as a tool to transform and catalyse the productive base of Nigeria’s economy.

Here is how the 100 for 100 policy will make the naira regains its value, which will lead to the crash of US dollar exchange rate in the FX market:

Percentage Increase In Export Volume

Sufficient local production, if effectively sustained, will translate to exports of such products to other countries around the world.

For instance, Malaysia’s palm oil revenue was more than what Nigeria got from oil revenue as of 2006. Unbelievably, Malaysia got palm oil seedlings from Nigeria in the 1960s.

Apart from meeting local consumption of palm oil in Malaysia, it’s able to meet international demand. This is the direction the Godwin Emefiele-led CBN wants the 100 for 100 policy to take.

The higher the export volume, the more foreign reserves Nigeria makes from such export activities, and the more the naira regains its value in the foreign exchange market back home.

Percentage Increase In Export Value

While the volume of exports focuses on the number of goods that are sold at the internal market, the value means the monetary foreign exchange the company and Nigeria would benefit from such international trade.

The higher the value, the lower the craze by local companies for forex. It means the Nigerian economy will earn more than rather than putting pressure on the naira at the forex market, low demand for USD, in the long run, will naturally make the USD crash at the fx market.

Decrease In Import Volume Of Industrial Raw Materials

It’s an economically hectic FX market in Nigeria when local manufacturers depend on the importations of raw materials for production. The CBN is saying “we’re ready to give you credit facility” through the 100 for 100 policy provided that you can source your raw materials locally.

This is commendable. Because the decrease in the import volume of industrial material raw materials mean little pressure on the foreign currency.

Increase In Production Output Of Financed Companies

The apex bank isn’t on a money spraying competition, neither is it sharing what some Nigerians call “national cake”. It’s saying, come, show us an increase in the production output of whatever you make.

In international trade, you have to meet local consumption before you talk about exporting what you produce to international consumers, this is exactly what CBN is saying.

Meeting our local production is going to reduce importation of some products, thereby lifting the burden of pressure on forex, through the CBN’s PPP, naira will appreciate against the US dollars.

Decrease In Import Value Of Industrial Raw Materials

If your company spends NGN500million to import industrial raw materials in 2018, NGN250million in 2019, and NGN50million in 2020, simply, it means you could completely source your materials locally if there is a financial boost within.

Sometimes in October, Godwin Emefiele disclosed that 40 percent of Nigeria’s forex is spent on importation of fuel which comes with economic consequences, part of which Nigeria is currently experiencing.

Recap:

The CBN’s 100 for 100 intervention policy is to boost local production, to reduce reliance on imported goods, and boost foreign reserves in the long run.

When production is done at home, it will definitely translate to job creation.

The pressure on the foreign exchange will drastically reduce thereby causing a natural crash of the US dollars, which would translate to good points for the naira.

Ready to apply?

Check the 12 required documents for 100 for 100 PPP loan in one of our simplified guides for local investors

NGN530/1$ isn’t good, we hope that the CBN will be transparent in disbursing the 100 for 100 funds to real manufacturers, not a politician who does not have a manufacturing plant that can add value to Nigeria’s economy.

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