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Leave the naira alone

By Luke Onyekakeyah   |   23 February 2016   |   6:04 am

naira dollarIT will amount to contradiction in terms if President Muhammadu Buhari and the All Progressives Congress (APC) government that promised, during electioneering campaigns, to bring the naira at par with the dollar now turns it to tissue paper by illogical devaluation. That will be the most strategic blunder of this government and it will haunt it forever. Buhari should insist on no devaluation.

History will record that it was Buhari that ruined the naira, even though naira’s trajectory to ruination began more than four decades ago. We should be talking of how to strengthen the naira rather than how to devalue it. Nigeria is strategic in the comity of nations.

The ongoing free fall of the naira at 395/dollar, is artificial and like every momentary storm will fizzle out. If the naira is officially devalued, it will be difficult to firm it up again. But if the depreciation is left to float artificially based on market demand and supply, a strategic intervention will strengthen it again.

Yesterday, the CEO of Capital Oil and Gas, Dr. Ifeanyi Uba, reportedly said that he could bring the exchange rate of the naira down to N200/dollar if he is contracted to do that. That shows a strong faith in the naira. If a shrewd business tycoon like Dr. Uba is optimistic about the naira, what then are we talking about? The artificial free-fall of the naira is stoppable with strategic intervention.

As far as I am concerned, the free fall of the naira will get to a point where most Nigerians can no longer afford the black market rate. When that happens, importers will not exit their businesses but will look inwards; medical tourists will be forced to patronise local hospitals and parents of students seeking admission abroad will change course to local institutions. Take note that those selling dollars are also business men; if they have dollar at a rate that no one is willing to buy, they will be forced to come down.

In a press release over the weekend, CBN’s Director of Corporate Communications, Ibrahim Mu’azu, urged members of the public to disregard any contrary information with regard to remittances to foreign students and medical tourists. He said all genuine users desiring to obtain foreign exchange for the above purposes should freely approach their banks with their requests and appropriate documentation.

The demand for foreign exchange to fund medical tourism and education abroad is a self imposed problem because we lack standard institutions. As the CBN opens the foreign exchange window for genuine purposes, that is not the end of the problem. Of course, the demand still depletes the limited foreign reserves that have been hit by the low oil price.

The situation will force the authorities to do the needful by building standard hospitals and educational institutions. I am looking for the day when whoever is Nigeria’s president, governors, politicians and top civil servants would seek medical attention in Nigeria instead of flying abroad for routine medical check-up. When that happens, the current situation would have been a blessing in disguise.

The question is where are the dollars that were floating in the country a few months ago? In the run up to the 2015 general elections, dollar was visibly common in circulation. Where are all those dollars? Did they develop wings and vanished into thin air? Why are people hoarding the dollar while the naira somersaults?

It is on that basis that I believe that the current foreign exchange crisis is largely artificial. I think some people who have large stock of dollar decided to hoard it in the wake of the Buhari’s war against corruption. It is no longer business as usual. Others are using it to sabotage government by calling for devaluation.

Some measures are already in place to curb corruption. The Bank Verification Number (BVN) and Treasury Single Account (TSA) have streamlined how money is held by individuals and organisations. The BVN has reportedly exposed huge frauds in the banks, as more than 23, 000 accounts are unclaimed. Equally, the TSA has plugged avenues for stealing billions through government institutions.

I don’t believe that the fall in the price of crude oil to around $30 per barrel is responsible for the naira woes. If that were the case, the currencies of the other oil producing countries that face the same predicament with Nigeria would have equally depreciated. But that is not the case.

It is wrong to devalue the naira based on mere speculation by foreign exchange merchants who want to reap naira windfall from their load of hoarded foreign currencies? Who does not know that some unscrupulous people sabotage government?

Granted that the naira is unofficially devalued at N395/dollar; that is easily reversible should the price of oil rise again. And oil price is bound to rise. Oil price fluctuates all the time. Nigeria’s economy, it should be noted, does not operate on known economic principles. The economy operates on ad-hoc basis. Those citing economic principles in the circumstance are not helping matters.

The CBN slammed the bureau de change operators because, for one thing, they constituted one avenue for mopping and hoarding dollar. There is ingrained selfishness and greed in the country. Some people’s preoccupation is to amass as much wealth as possible to the detriment of the rest of the people. Besides, we are not thinking together as a country.

The current situation is an opportunity for Nigeria to restructure her economy. The removal of some 41 items from the CBN’s import foreign exchange (forex) window is a step in the right direction. The list should be expanded to encourage local production of those goods even when the situation improves. The dollar squeeze provides opportunity to enhance local production at all cost.

Finally, I would like to say that who pilots a ship in a storm is critical for survival. Nigeria’s economy is in a severe storm. Who manages some key ministries is crucial. There is need to build global confidence in the economy. After rain come shine. It is better to suffer now for a better future.




  • primecover

    I totally disagree with the writer on his below submission as i quote

    “I don’t believe that the fall in the price of crude oil to around $30 per barrel is responsible for the naira woes. If that were the case, the currencies of the other oil producing countries that face the same predicament with Nigeria would have equally depreciated. But that is not the case”.

    The currency of other countries might not fall for the following reasons 1. Strong reserve which might be used to cussion the effect of the fall in crude oil price. 2. Those countries might not as import reliant as Nigeria. 3. Other sources of $ inflow might still be stable especially multi-dimensional economy. We have a choice either to continue to support the naira with our dwindling reserve or find other alternative solutions which includes diversifying the economy and sourcing raw material locally. Government can also review the list of items with import waiver so as to reduce the pressure

  • Chef David Ebunosa

    Thanks Luke Onyekakeyah,i admire your speech.Those Nigerians that want to see the country great should leave naira alone for now and forget trade in dollar.Nigerians should pray for PMB administration because his ready and his doing well.

  • Tru

    “The question is where are the dollars that were floating in the country a few months ago? In the run up to the 2015 general elections, dollar was visibly common in circulation. Where are all those dollars? Did they develop wings and vanished into thin air? Why are people hoarding the dollar while the naira somersaults?”

    I think where Mr Luke should be really worried is the answer to his very question Quoted above. Part of the answer is that most hoarders of the USD still think that Naira will fall further than the N400. So, If they sell it now, they may have to buy it at a later date at a higher price. Most of these people have future dollar commitments like overseas school fees etc. It is very easy to say that people should send their children to Nigerian Universities. Some people WHO CAN AFFORD IT will not want to disadvantage their children by sending them to local universities with sub-par quality of education. Even if they are forced to send the younger ones who are yet to enter university to Unilag or UNN etc., they will not want to withdraw their kids already in Harvard and Yale and enrole them in the local universities. They will buy the USD even if it sells for N1000 and they still have the means to ensure those children complete their overseas education.

    So Mr Luke should be very afraid that even at N400, people are still not selling their dollars.

  • GOV. FASHOLA

    am getting confuse day in day out with with the present condition of Dollars. or are we suffering today for better future like Buhari said some months ago that by 2030 sufferness would became an history in this country.

  • OI

    Come on Nigerians lets face it… is dollar the present currency in the country? Take look at China, Japan the difference between the dollar and their currency is huge but they are the second and third largest economy in the world respectively. Its time for us to think “start thinking” to add value and way out of the economic woos! From history you discover that wealthy individuals take full advantage of this depressed times to make a fortune, we collectively as a nation can make head way if smart Nigerians can think. Start thinking of what to package that can be exported, stop celebrating “419” individuals that are discouraging investors. I tell you the truth every economy you admire today went through down time like this but start people took smart moves and sacrifice to come out. Its time to copy what these countries have done and add our own idea to it to make this country one of the emerging economy in this end time. Stop blaming government start thinking… Stop dependency on foreign made products or goods START THINKING. Individual is what make a strong vibrant economy…

  • Charlie

    Another economic illiterate confusing the masses.

  • amador kester

    Each argument has the merits and drawbacks for instance proponents of floating naira say that fixed exchange rate launders dollars to crook s to sell heavily in the black market and that a higher naira exchange rate will encourage made in nigeria product marketing

  • Arinze_Ibeagwa

    I agree on most things as written especially bordering on the President resisting the urge or advice to devalue Naira. However, it baffles me that you believe there is any iota of seriousness in Ifeanyi Ubah’s assertion that he can get dollar to 200naira if given such “contract”! Please, can I advise that you look elsewhere when making references to people’s ability, rather than the likes of Ifeanyi Ubah, for we (Anambrarians) know him quite well.

  • Emiko

    Can somebody explain to me about countries like Benin Republic ( cotonou) that imports everything to toothpick and are still suviving for years on taxes duties paid on this importations of commodities without crying or complaining of devaluation of currency like Nigeria

    • emmanuel kalu

      Benin Republic depend on our ineffective and inefficient port system and porous border. majority of the goods that is smuggled into Nigeria goes thru their ports. Nigeria is faces with a problem, however our problem is already solve, we just need to implement the solution that have being tried and tested. CBN has provided the monetary policy, we are awaiting the president fiscal policy. The president doesn’t have to invent the wheel, all he has to do is implement so good meaning policy already on deck that were filled with corruption. The president didn’t start BVN or TSA, he just implemented it properly. we already have the agricultural plan, power plan and many more. now is the time he just implement all of them and things would turn around.

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