Why Osinbajo is right on dollar rate
Sir: Early last week, many newspapers carried banner headlines that seemed to suggest that Vice President Yemi Osinbajo was advocating for a devaluation of the Naira, an alternative policy view from the President’s. In the first day of a two-day cabinet retreat last Monday, the VP had made a long presentation on the overview of the economy at the end of which he argued for a single market-determined rate for the Nigerian currency, rather than the current system of dual rates with wide arbitrage that encourages round tripping and fraudulent practices.
Now, what exactly did the VP say and what are the implications of his statement? An official statement from his office explained that the VP’s argument at the retreat that the naira value was kept artificially low did not amount to a call for devaluation. ‘‘Prof. Osinbajo is not calling for the devaluation of the Naira. He has at all times argued against a willy-nilly devaluation of the Naira,’’ the statement emphasized. It stated further: ‘‘For context, the Vice President’s point was that currently the Naira exchange rate benefits only those who are able to obtain the dollar at N410, some of who simply turn round and sell to the parallel market at N570. It is stopping this huge arbitrage of over N160 per dollar that the Vice President was talking about. Such a massive difference discourages doing proper business, when selling the dollar can bring in 40 per cent profit!’’
The VP is on point in arguing against the CBN’s dual exchange rate. Many senior government officials and some nefarious bankers have corruptly enriched themselves hugely through round tripping, the practice of buying dollars at official rate and turning around to sell at the unofficial rate. Many of the Bureaus de Change (they sell at the unofficial rates) belong to serving and retired CBN directors.
Implicit in the VP’s presentation at the retreat is the time-worn axiom that the value of the Naira will only improve if the country’s productivity also increases, or if we do away with most of the imported things we ship into the country daily. The Federal Government should therefore focus more attention on growing our manufacturing capacity for exports and domestic consumption instead of worrying unduly about the exchange rates.
There is no reason why the country cannot manufacture and export value-added agricultural products like tinned tomatoes, starch from cassava, chocolate from cocoa and textile from cotton. Why do we still depend so much on imported pharmaceuticals, artificial hair and beauty products? Every single Nigerian woman wears imported artificial hair that costs as high as N150, 000 in some cases. What are the exchange rate implications of these? (I don’t mean any disrespect to our beautiful women folk please). What about the school fees we pay in foreign universities for kids or the mortgages we remit periodically for homes we have abroad? With all the cattle we have in this country, is there any reason we are not exporting milk and other dairy products? Truly, the value of the Naira does not lie in tinkering with the exchange rate every day. We just have to start making some stuff ourselves.