Now that the Naira is strengthening – I

I have written series of articles on this page regarding what I think about the Naira and its management by the Central Bank of Nigeria in recent times. My simple opinion is that at our stage of development the best we can do is continue to ‘manage’ the currency within limits and that perception management is a key part of determining the value of a currency; especially the Naira. In recent times, we have seen the perhaps deliberate mismanagement of perception about the Naira, especially from those that our government love to consult about issues of the economy. These are the people who ask that we devalue the Naira because ‘it is too strong’, and in order to ‘encourage foreign investors’. They are talking arrant nonsense. Throwing figures about does not confer intelligence. How do they determine that the Naira is too strong? What happened to the foreign investors they promised after the Naira tumbled? I did warn about something called ‘self-fulfilling’ prophecies, which as a theory in international finance advises that people not talk down their currencies. No one listened. 

The same wonderful economists referred to above are the ones who also advise that Nigeria privatizes everything, and borrow loads of dollars from abroad. I am tired of writing from my heart while our so-called leaders decide to choose the exact opposite of what will help our country. Whereas the president says he is against devaluation, the Naira has been devalued anyway, and IMF is on the side, asking for more devaluation. Most state-owned enterprises in Nigeria are now privatized, while even budget 2017, just like 2016 and 2015 before it and as far back as the eye can see, is predicated and programmed on foreign and local borrowing.  As a matter of fact, since 1981, with the exception of 1997 and 2008, there is no year that Nigeria didn’t borrow to fund its budget. The Director General of the Debt Management Office, Dr Abraham Nwankwo, in justifying the currently-trending $30billion proposed borrowing, recently offered that Nigeria borrowed even through our recent oil booms, meaning that even when crude oil sold at $140, or $100, Nigeria simply borrowed.  

Where is the money? What did we do with all the yearly borrowings? Certainly the monies were not well-invested in infrastructure and human capital. The monies simply went into private accounts because Nigeria is a fallen elephant and everyone is falling over themselves to cut a large chunk for themselves. Those we assigned the authority of managing the elephant up close don’t do anything else all day but carve up the elephant for themselves and their nuclear families.  

But back to the matter of the Naira, the argument from the other side is that the CBN should leave the currency to market forces of demand and supply; that the banks should totally hand of the management of the currency. I disagree. It just sounds a bit reckless to me.  You see, when Dr Mrs Okonjo-Iweala wanted to remove fuel subsidies in 2011, and mounted a big campaign to convince the people (ironically no one does that anymore these days), my main grouse with her was that she attempted to paper over the details of what had gone on with the  administration of old subsidies. She was basically saying ‘let’s forget about the past and start afresh’. And so we protested, until they had no choice but to reveal what had gone on. Apparently different agencies had different subsidy figures. While PPPRA claimed it was N1.3trillion, CBN saw 1.7trillion, OAGF saw N1.8trillion and NNPC said it was N1.6trillion in their books. At the end of the day, the figure settled at N2.3trillion (as confirmed much later by Okonjo-Iweala as she departed finally for another assignment in the USA).  Today, luckily a few of the fraudsters who ripped this nation off have been convicted, even though they may also be bailed like Bala Ngilari. In this jungle of a country, people who are convicted already can still get bail while they appeal the judgment. Once you have money, our evil old judges will grant you any request and shame the nation.  But if you are poor, they will forget you in prison without conviction. 

Well, it is in light of what happened with crude oil that I see the predicament of the Naira. Contrary to the opinions of those who believed – and still do – that all the CBN had to do was simply ‘float’ the currency and hands off its management, I believe there is nothing wrong with ‘unpacking’ the sources of demand for and supply for foreign currency to see if there are some adjustments that can be made. It’s like a Structural Adjustment (I’m sure the IMF/World Bank buffs will like those words). Yes, there is nothing wrong in adjusting the structure of demand and supply for the US dollar in Nigeria. To that extent, we retain the right to dictate what we want to fund with scarce dollars and what we don’t want to fund. I don’t believe we should curb too much though, but if Nigeria refuses to fund the importation of eggs from South Africa, or toothpicks from the USA, or fish from Europe, well, given the stage and structure of our economy, I would support that… for now.  

I will advise that the list of 41 ‘banned’ imports may however be trimmed down to say 5 or 8 and the supply side should be examined and if possible incentivized. The questions to ask on the supply side are; who and who is supposed to be supplying Dollar into the Nigerian economy? Oil exporters, non-oil exporters, tourists, and so on. Then why are they not supplying enough and what can be done to encourage them? If we have rules that need to be met and people are flaunting them, what can we do to ensure compliance? It is only after we have done our homework on the supply and demand side that we can begin to talk of ‘floating’ the currency and leaving it to the mercy of ‘market forces’.  

Apparently, there is still too much to be done, given the kind of stories of corruption, subversion, sabotage, smuggling, falsification of documents, collusion, forgeries, resistance of authority and outright frauds we hear these days. Someone needs to rescue the soul of this country but what we see is that we seem to be deliberately turning the knife to ensure it dies faster. Or what does one say about the allegation that one Senator Hope Uzodinma is implicated in the attempt by one Masters Energy Ltd – an oil company – to clear billions of Naira worth of rice, as yeast? The MD of that company was given a national award by President Jonathan. That is what we see in Nigeria; almost all national awardees are hardened criminals!

A large chunk of demand for US Dollars in Nigeria is for the purpose of corruption. As Naira devalues more and more, those who take huge bribes in Nigeria demand for dollars.  Reading through the allegations brought against the Senate President in the matter of Paris Club refund gives a saddening snippet of the kind of transactions that take place among the high and mighty in Nigeria. Andrew Yakubu’s $9.8million also formed part of the ‘demand’ for dollar in Nigeria. I believe that a higher responsibility for us, is to find how we can get government to be serious and stop being selective with its anti-corruption war. That will add much more value than this standoffish stance adopted by our over-educated, foreign-bred young elites who merely repeat what they read in some textbook.