What exchange rate for my pocket money daddy- Part 1
It was a relief when Alaba agreed to go to a tertiary institution anywhere in the world. He argued he knew everything that Ifa teaches and so was prepared for adult life. Trouble argued that tertiary education would merely certify his talent. A parent’s printed and signed certificated awarding Alaba not only a bachelor’s degree first class and a doctorate degree cum Lauder would be unacceptable to any market place. So, Alaba son brighter than parent agreed to go into an institution overseas. A new argument arose around the exchange rate that would determine his pocket money while overseas.
As we all know as part of our self-imposed IMF-inspired Structural Adjustment Programme of 1986 Nigeria adopted a dual, later a multiple exchange rate for the naira. There is nothing alarming about this instrument to resolve immediate overseas payment difficulties. Many countries have had to do it at some point in their financial and economic history. In such sane places, the exchange rate is soon unified and financial and economic life continues. Nigeria would not be Nigeria if such a sane instrument did not become stupidity. 32 years later Nigeria still has a multiple exchange rate. It has sickened the once rich but now terribly poor naira. Even the IMF that inspired the idea has since begged Nigeria to unify its exchange rate but no. The lost hound is lost and does not hear the call of its owner, the hunter.
Dan Abdul Fulus is CEO of Abdul Fulus International a currency trading company. Recently he described Nigeria’s exchange rates regime as “crazy”. “We seek unity of one group or another, one state after another, and even the unity of the federal government. Yorubas must unite, Igbos must unite, Arewa must unite, Ijaws must unite, the federal government must unite. No! The one unity we need right now is the unity of the exchange rate for the naira. It is the medicine that would cure the sickening naira”.
At one time, we had six exchange rates for the naira. There were official exchange rate, banks lend to each other exchange rate, international money transfer exchange rate, black market exchange rate, religious pilgrims’ exchange rate and another exchange rate called the unknown rate until you are there for investors! This is enough to make any currency sick.
Explaining the rational for these various exchange rates a spokesperson said “the multiple exchange rates are the only way forex liquidity could be maintained while simultaneously allowing investors to trade their own dollars at a more market determined rate.” Really? Are investors now traders in dollars or manufacturers and import/export business people? Where anyway is the ‘forex liquidity’ this exchange regime is supposed to conjure up? This is one country where solutions do not solve problems. They simply compound the problems.
At another time later, there were seven exchange rates available. Official rate was 305 – 306 naira to the US dollar; black market rate 390 – 400; Muslim pilgrims to Saudi Arabia rate was 190; retail rate set by licensed exchange bureaux was 360; rate for foreign school fees, BTA, Medicals abroad was 375; investors/exporters rate is open determined by demand and supply; and seventh one, rate for SMEs using form X not specified.
Finally as at 23rd of March 2017 we achieved twelve exchange rates as listed below: pilgrims rate 197, PPPRA (Purchasing Power Parity) rate 285, Budget rate 305, Interbank rate 307.75, International Bank card rate 319, Travelex rate 345, Special Funds airlines rate 355, Western Union rate 375, Nigerian students abroad rate 375, Foreign medical trips 375, Bureax de change rate 380, and parallel market rate 420.
This exchange rate regime has left the economy and the finances of the country not only in a parlous state but also easy to scam. What is needed are bold steps to stop the rot, hard decisions to put a stop to the stupidity. What is expected is that political leadership would “do the needful”. But where in Nigeria has the political leadership, the party in power say or the president of the country bothered to do the needful, where?
The effect on the economy over the 32 years of this exchange regime can be summarised from the following quote form a professor of economics Mike I. Obadan: “The real appreciation of exchange rate ENCOURAGED imports and capital flights, DISCOURAGED non-oil exports and helped to sustain the manufacturing sectors’ over-dependence on imported inputs. The agricultural sector was seriously undermined.” (From Central Bank of Nigeria Economic Review, “Overview of Exchange Rate Management in Nigeria from 1986 to Date”, vol. 30, No. 3 July – September 2006, page 3.)
Alaba had so much to choose from. There are the Ivy League universities of the United States of America. Harvard and Yale, Columbia and Temple, even stressful MIT. He liked the story of the founding of Harvard but he did not feel like living in the country. What about the United Kingdom? London School of Economics, Oxford and Cambridge, Edinburgh and Glasgow? Too old in their ways, staid and even stale, according to Alaba.
What about the radical places around the world? Like Havana Cuba, Moscow Russia and Leningrad, sorry St. Petersburg Russia? Alaba said they have all been beaten by the West and no longer pure. And what about University of Beijing? China, the rising place of innovation and imitation, where the sky limits nobody. He would have nothing to do with China. Not now anyway. Maybe later. So where?
Alaba mentioned Israel, Saudi Arabia and Rome in Italy. He could study architecture in Rome and visit The Vatican and Venice as he liked. But he rejected Italy. Best for visits. Saudi Arabia and Israel were the last options. Imagine being honoured as an Alhajji simply for visiting Mecca and Medina.
What would you call those who lived in Mecca and Medina? And to have JP after his name not just for visiting Jerusalem but for living there, studying and certificating his talent on ground walked by Jesus Christ. Moreover the exchange rate for religious pilgrims was best of all in Nigeria. That should be the exchange rate for his pocket money. The challenge is to get CBN and the Bank to accept Alaba as pilgrim/student or student/pilgrim. He would not choose where to go until the religious pilgrim exchange rate was accepted for his pocket money. Then he would make his choice -Israel or Saudi Arabia.
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