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Devalue to scrap the Naira – Part 2

By Raphael Okunmuyide
03 June 2016   |   3:04 am
Accordingly, any devaluation of the Naira in its presently comatose health situation will accelerate its demise as it may lose the two nominal functions it still seems to perform patchily.
Devaluation of the Naira

Devaluation of the Naira

Accordingly, any devaluation of the Naira in its presently comatose health situation will accelerate its demise as it may lose the two nominal functions it still seems to perform patchily. But the critical issue is that while the sick person patiently follows the doctor’s advice in avoiding the consumption of those nutrients that are harmful to his health and takes the prescribed medications to drain those substances from his body until he achieves full recovery, the average Nigerian is too impatient for the positive outcome of the government’s anti-corruption drive through which the Naira can be restored to good health for everybody’s economic comfort. While many analysts daily chant about the economic miracles of China, India, South Africa (behind the apartheid walls of economic sanctions!), Malaysia, Singapore, Indonesia, etc they are lips-sealed in describing the hardships that the citizens in those countries had to undergo during their decades of internal self-development under their tough but focused and honest country leaderships.

But Nigerians want Spanish omelettes without breaking eggs! It is too difficult for the average Nigerian to believe that even if only 50% of Femi Falana’s (SAN) estimated $220 billion looted funds is recovered to re-stimulate the economy’s growth, the Naira’s exchange rate can rapidly appreciate to at least N100 per USD which will obviate foreign loans and the negative multiplier effects of their conditionalities. Hence, why can’t we exercise more patience for better results from the elaborate efforts to recover those looted funds?

And the fable of the causal link between devaluation and FDI should by now be recognised for what it is: an absolute lie! If it was true, unemployment would not have risen to this explosive level and Nigeria should have been over-filled with the output of those investments after SAP since 30 years ago because it was one of the fake carrots thrown at Nigerians by the promoters of SAP to accept devaluation. But that lie has been exposed as, if anything, FDIs have been largely restricted to the opportunistic fly-by-night profit-suckers on the equities and bond markets.

In any case, why should we continue to assume that foreign investors who know how Nigerians fleece their country’s economy daily through capital flight, money laundering in their celebrated “fantastically corrupt” character will invest their capital in Nigeria? If infrastructure-paralysed Nigerian economy is such a good investment destination as a motivation for devaluation, why do Nigerians not invest in their country and why should we assume that foreigners are either smarter than us in our country or that the foreigners are too stupid to read between the lines? And who in his right senses will invest his money in crime-ridden south-south and south-east states, as partly confirmed by Chris Ebede, the international president of ‘NICE’(an organisation of Igbos living in Europe) who declared: “Europeans wrongly see Igboland as a region for criminals” during his recent “damage-control” visit to Anambra State? (Vanguard, 27/03/16). Also, the first modular refinery that will start operation off the coast of Lagos in 2017 is owned by an Ibo man. Why did he not establish it in the south-south? Is money not “thicker” than ethnic/tribal/regional blood?

Nigeria’s crippling inability to pay salaries and pensions in all tiers of government based on the whopping 140% increase in the minimum wage in an economy with a nominal 7% GDP growth in 2011 despite clear warnings of its risks for inducing socio-economic upheaval through a “Corruption-fuelled inflation” in “the wages of Corru-flation” (The Guardian 11/04/11) has come to pass. What seemed pessimistically alarmist five years ago has become a burdensome reality through heavy borrowing and especially the high opportunity costs of such facilities which climaxed with a 90:10 recurrent:capital expenditure ratio by the Federal Government in 2015 as evidenced by collpase of infrastructure with which the new administration is struggling daily.

This is also why a Naira devaluation in this critical situation of its comatose value-health will be a crushingly heavier “corru-forexationary” burden on the nation especially because most of the forex that will be released through the parallel market for the devaluation exercise will be from previous proceeds of corruption to create a new generation of idle Naira mandarins.

“Corru-forexation” will definitely infuse a compound dose of Corruption on the Naira’s value on top of the virtually intractable impact of “Corru-flation.” Its impact on the economy will be insurmountably devastating : high level double-digit inflation and interest rates that will hobble the fiscal plans for growth re-stimulation in real terms, further emasculation of the poor and the middle class in the absence of a Brazilian-type of wage-indexation policy as the super-crushing weight of inflation will render the planned social welfare programme ineffective because the government will be ill-resourced to match wage increases with the galloping inflation that will result.

Sporadic industrial unrests that may occur will certainly stimulate more capital flight than the quantum of inflows to further drain the economy since most of the inflows will be parasitically targeted at exploiting and extorting rather than in investing for real development. These mishaps on monetary policy will further attenuate its link with the robust fiscal policy that has just evolved through the 34-point prioritisation programme in the 2016 budget, being one of the best qualities since the end of the era of five-year development plans.

Hence, it is highly doubtful if the Naira can survive the onslaught from the double whammy of “Corru-flation” and “Corru-forexation” for long. Indeed since it took about four years for the single impact of “Corru-flation” to wreak the fiscal plans, it is not unlikely that the combined impact of both may take less than two years before the economy bursts. The deliberately silhouetted champions of this new round/regime of devaluation will disappear into thin air when these terrible economic consequences start like their predecessors did in 1986/7 to leave those in government to dance to the music of economic turmoil they composed.

Therefore, it will need to be replaced with another currency as some countries like Argentina, Brazil and Chile in dire economic quagmires have done in recent times! And the greatest casualty will be the war against corruption which would be lost as, through “corru-forexation”, the economy would be feasting, however short-lived, on the “haramic” proceeds of corruption!
Okunmuyide wrote from Lagos.