The truth Nigeria must embrace
Curiouser and curiouser, it must be said, are the ways of managers of the Nigerian economy. So much noise has been made about the diversification of the economy. The Muhammadu Buhari administration is being touted as having broken from past failures and already making progress as evidenced by “growing non-oil exports in the light of competitive and comparative advantage created by the depreciation of the naira following the introduction of a market reflective exchange rate (MRER)”. Is this a sincere assessment?
If non-oil forex is rolling in, why is the Buhari administration frenzily in search of forex via foreign loans and sale of national assets? Are the excruciating mass impoverishment and deepening recession occasioned by the MRER the desired fruits of economic diversification? Let this be known: Buhari’s attempts at economic diversification will fail as in the past owing to the willful and corrupt mismanagement of Federation Account oil proceeds and the naira exchange rate.
Since the 1970s, the economy has been victim to the improper withholding of FA dollar allocations alongside the fundamentally mistaken concept of external reserves. The concept implies that Nigeria would not possess any external reserves if the FG did not export gas and crude oil based on the ownership of 49-60 per cent stake in the NLNG and petroleum joint ventures with international oil companies. (Ironically, the Buhari administration is scheming to sell off the source of its external reserves in order to shore up the reserves! Absurd!). Nigeria’s concept of external reserves is fallacious. For instance, China’s external reserves of over US$4 trillion were not derived from direct export earnings by the Chinese government. Any country’s export earnings coextend foreign currencies earned by individuals and economic agents therein just as its external reserves are the unspent portion, nay, the collective savings from the total forex receipts. Accordingly, Nigeria should fall into line in order to quickly exit the economic recession on her own. In this regard, fatuous impediments should be set aside: the Foreign Exchange (Monitoring and Miscellaneous Provisions) Act 1995, particularly Section 17 that sets no time limit for keeping foreign currencies in domiciliary accounts institutes dollarisation of the banking system. That Act violates our unique national or naira legal tender jurisdiction proclaimed in all versions of the CBN Act since 1959. Its Section 17 similarly undermines and prevents the actualisation of government’s constitutionally mandated economic responsibility earlier noted. Corroboratively, the House of Representatives Committee visited South Africa early in 2013 (February?), learnt rudely that the rand rules in that country and returned to raise a motion against dollarisation here, but their efforts were ineffectual, no thanks to corrupt vested interests and the Nigerian economy is the worse for it till date.
Ordinarily, such domiciliary accounts serve as a temporary stop for in-coming export proceeds pending their smooth conversion to the national legal tender via the forex market. And so, the amount of over $20 billion that has overstayed in domiciliary accounts should be swiftly transacted at the pre-flexible market exchange rate and the amount transferred to put the actual level of Nigeria’s external reserves at over $45 billion. That slakes the Buhari administration’s thirst for foreign currencies. Additionally, there should be a quick resolution of the militancy issue in order to restore normal flow of forex from crude oil exports.
What next? The Ministry of Budget and National Planning’s strategic implementation plan recognises that “ government can show the way and help to create the enabling environment but it is the private sector that is the primary engine of development of the economy”. Then government promises to bestow magician-like from thin air an appropriate foreign exchange regime as well as increase low-interest lending to the real sector. On its part, the organised private sector, which lies on a bed of forex lodged in domiciliary accounts, demands to be allocated a preferential chunk from the dwindling oil proceeds at reduced exchange rate. From all directions, self-professed economists rend the air with calls on the FG to conjure a miraculous economic diversification. Nigeria, be serious! Only a truly market-reflective exchange rate mechanism will quiet the din, form the sound foundation for beneficial management of the economy and put the country to work.
The outline of such a forex market? Individuals and corporate persons including the tiers of government should convert any proceeds from export of goods and services to naira legal tender amounts within a specified short time frame through the deposit money banks (but bureau de change for tourists). Portions of external loans and external reserves for domestic payments, Diaspora remittances and forex brought in by foreign direct investors (ban vampiric portfolio investors) should follow suit. Sellers and buyers of forex should pay DMBs a commission specified by the CBN. DMBs shall not enjoy any price spread on market-determined exchange rates. The non-eligible import list should be updated at specific intervals and strictly adhered to. DMBs should sell surplus forex to the CBN to boost FG-owned external reserves at the end of each forex trading day. Forex should never flow from DMBs and CBN to BDCs. In order to discourage trade in contraband (which undermines domestic manufactures), payment for commercial-size imports should be effected through DMBs while the so-called “imports not valid for foreign exchange” should attract punitive tariffs or be outlawed.
And painlessly, a conducive production environment will quickly take root and pave the way for full-blown economic diversification.