Nigerians spent a total of $39.66bn on foreign education and healthcare-related services between 2010 and 2020, according to the Central Bank of Nigeria data.
According to CBN’s Balance of Payments, Nigerian parents and guardians paid about $28.65bn for their wards to study abroad during the period under review.
The BoP report also revealed that Nigerians paid $11.01bn for healthcare-related services in foreign countries.
The amount spent on these foreign services is almost equivalent to the current value of the country’s foreign reserves which stood at $39.51bn as of March 23, highlighting its high cost.
These statistics and their impacts were cited in a financial report released last week titled, “A Simple and Factual Explanation of Nigeria’s Exchange Rate Dynamics”
According to the report, the high cost of these services has drastically increased the demand for foreign exchange in the country, which has put a strain on the value of the naira to the dollar.
The report which seeks to provide answers to questions on the continuous rise and fall of Nigeria’s exchange rate explained that the exchange rate of the naira is the price of the dominant foreign currency in the country – the US dollars.
It added that like the price of every other commodity, the price of the dollar in Nigeria is determined by the interplay of demand and supply of the foreign currency in the country’s market.
The report noted that an increase in demand for a commodity leads to a rise in the price of that commodity, adding that a similar result is replicated when a fall in supply occurs.
Using the same logic, the report explained that the depreciation or appreciation of Nigeria’s exchange rate or the naira is determined by the rise or fall of demand and supply.
On demand, the report explained that factors such as the cost of foreign education, healthcare, and a large import bill had had major impacts on the increase in the demand for foreign exchange in the country.
It added that the factors had also greatly contributed to the weakening of the naira.
According to the report, between 1998 and 2018, the number of Nigerian studying abroad quadrupled, from 15,000 to 96,702, a rise attributed to the spike in the cost of foreign education.
It added, “Today, a sizeable amount of the foreign exchange request Nigerian banks receive for school fees are for primary and secondary school education, some of which are for neighbouring African countries.”
On the impact of imports on forex demands, the report noted that Nigeria’s import bill had continued to skyrocket since 1980, declining slightly only in 2021.
According to the report, Nigeria’s annual import bill rose from $16.65bn in 1980 to $67.05bn in 2014, falling marginally to $54.71bn in 2021.
It pointed out that with the current level of demand for forex, the country’s exchange rate would be under constant pressure to rise, especially if its supply either remained constant or fall.
On the supply side, the report compared the cost of imports with the revenue earned from exports between 1980 and 2020, which showed that while the country’s import bill continued to rise; its exports showed a steady decline.
For instance, the report said that over the last seven years, the demand for the dollar had exceeded its supply by about $18.45bn.
It also said that oil export, which accounts for over 90 per cent of our foreign exchange earnings, had fallen from $93.89bn in 2011 to $31.4bn in 2020.
For non-oil exports, the report decried challenges constraining forex inflows from this type of exports.
While lauding the efforts of the CBN to stabilise the naira through the introduction of policies in critical sectors of the economy, the report noted that the task of stabilising the country’s exchange rate shouldn’t be left to the apex bank alone as it requires the collective effort of every Nigerian.
The report recommended a strong production base that will enable the country to produce goods and services that the rest of the world will be willing to buy, which will, in turn, increase the supply of dollars into the Nigerian economy.