Leave the naira alone
IT 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.