Now that the Naira is strengthening – II

I will like to advise those who are not happy with the attempt to strengthen the Naira through mere administrative gimmicks to stop being hypocritical. How can someone say he’s a defender of ‘market forces’ and transparency, and you think that small users of the dollar should be totally excluded from the same market? The reason why Nigeria almost lost control of the Naira is simply because a segment that counted was neglected, nothing more. And that segment is very critical to the perception around the Naira. People must travel no matter what. That is a legitimate aspect of the market. And apart from those traveling for leisure, parents whose children are stranded in schools abroad will obtain foreign currency AT ANY RATE, for as long as they can find the money even if they have to sell assets. Of course education is the greatest investment. Go and tell a family whose loved one is gravely sick and in need of medical attention abroad that they should be patriotic. Even the president went abroad to treat himself. Nigerians paid. So I wonder why highly-educated defenders of market forces will turn around and be rabid excluders of any form of legitimate demand, choosing to talk about the CBN’s pandering to ‘the middle class’ of which they are part. Demands from the middle class are legitimate demands anyway.  The fact is that the dollar became a mystery for most Nigerians at a point and now it has been demystified. 

That is the big lesson. The issue is not about the CBN using hard-won dollars to fund Personal Travel Allowances and foreign education. The lesson is that the panic has been removed from the market. They say fear and greed drives a market. For me that is bad market. Fear, greed, panic should be minimised in a market in order to find balance. These emotions only cause booms and crashes. 

When the CBN allowed sales of PTA, many people projected that Nigerians would obtain dollars at N375 and offload at markets at N470. In time, we have seen that margin disappear. Now you will have to sell at a loss. The parallel market operators have wised up like they should. Except the CBN reverses course 180 degrees, I don’t see that era any time soon coming back when the divergence between official and the ‘real’ market will be something like N100 to N200 Naira. The CBN should not reverse course. The reserves will not deplete so rapidly because Nigerians are paying for what they buy. Those focused on how much in absolute terms that the CBN has spent have chosen to ignore the fact that PTA users, and student etc, are paying N360 today, for the same dollar that CBN is selling to manufacturers at N305. That means they are paying a premium of N55 and that CBN could always replenish its stock. Our appeal is that the CBN should continue to close that gap. They should bring down the PTA rate to something like N320 soon, and see the parallel market crash further. They may even toy with bringing down the official rate to somewhere like N280. I have written before that we can ‘revalue’ the Naira. It is doable. I am less concerned with ‘strengthening’ the Naira than I am with ensuring that the ‘perception premium’ disappears by using positive news to drive out negative news. Those who want the Naira to crash to say N700 have a long wait in the offing. If they cannot add to this economy and the betterment of this society, they should keep off. The way some of them parrot the opinions of their foreign portfolio investor friends is sickening.

The larger economy is not well-managed for now, but let us hope for improvements. With advocacies from several quarters we may just be able to rid ourselves of this unnecessary corruption and frauds and ensure that our demand for foreign exchange is trimmed. Some of us are ready and willing to do what it takes to save our dear country. The others can keep thumbing their noses and claiming to be smarter. Some times, a good cause is worth defending. 

Meanwhile, the former regime that mandated for 60% of all FX allocations to be reserved for manufacturers ended up in a disaster. The amounts taken by each ‘manufacturer’ on a weekly basis was enough to satisfy 100,000 Nigerians (thereby creating a good vibe and influencing perception positively) and in spite of these ‘manufacturers’ bidding for millions of dollars every blessed week, it was impossible to point to what they achieved with the foreign exchange. Could they have been producing for only local consumption? Did they export and fail to remit proceeds? Remember when Garba Shehu warned about impending famine because 500 trucks of grains left Nigeria each week? Who exported the grains and to where? What happened to the proceeds? Or once you cross the borders there is no accountability?  There are all sorts of gimmicks in this country that is on autopilot. One of the schemes is that a manufacturer can apply for millions of dollars to import ‘equipment’ or ‘raw materials’, and simply remit the dollars abroad into their friends’ account.  There will be a form M, being documentation for an import transaction. But nothing – no equipment or raw materials have to come in. All the documentation to ‘show’ that goods and equipment came into Nigeria can be arranged – Bill of Lading, Clean Certificate of Inspection and whatever else is needed. The Customs are there to put a stamp on it all. Hameed Ali will not and cannot do anything about it. How do you think they become billionaires on their meager salaries? 

It is disheartening that our banks are trying to halt this run. In one of them, I applied for PTA for almost two weeks, only to be told on the eve of my departure that their head office did not disburse, or something of the sort. The CBN spoke up the next day that the banks were trying to frustrate their efforts. Many of the bank MDs have been on the corner of those asking for more devaluation and by now, I understand that there’s something in it for them. It just doesn’t make sense. Yet, I believe the whole of Nigeria can defeat these forces no matter their connections. We just have to be focused.