The nation currency, the naira hitch is week hit its record low at the parallel market, trading shy of 400 naira to one dollar by Friday.
The report showed that Nigerian currency is gradually going the way of the old Ghana cedi and Uganda shilling, which were worth less than the value of the paper they were printed upon.
Nigeria found itself in this critical situation today because of the mismanagement of the economy by the successive administrations that refused to project into the future and foresee a situation where crude oil will no longer sustain our appetite for importations of all goods.
Today, crude oil price has fallen globally to around $28.85 per barrel, while our foreign exchange reserves have dropped to around $27.83 billion by February 12, their lowest level in more than 11 years.
Few years ago, Nigeria was earning an average of $114 per barrel of oil and instead of expanding our industrial base, build infrastructure and genuinely invest in the welfare of the citizens, our government was busy sharing the commonwealth among the elites to the detriment of all. Today, not only the nation’s currency that is going through tough time, the entire economy is in a state of comatose, inflation is gradually rising while everywhere you go, poverty is fast accelerating.
The major issue on the mouth of most Nigerians, surprisingly including the market women and ordinary Nigerians on the street is the exchange rate of the nation’s currency.
The debate has been either to devalue the naira or continue to maintain the culture of fix exchange rate, which allow the central bank to administratively determine the exchange rate of the naira rather than allow market forces. President Mohammadu Buhari has came out boldly to tell the whole world he was not ready to “kill the naira,” by this he meant he was not willing to succumb to the advice of the economists and foreign investors advocating that a more flexible exchange rate, determine by the forces of demand and supply should be allowed.
From both the President and CBN perspective, fixing the exchange rate will protect the interest of the common man and reduce the impact of imported inflation on the economy. It was argued that Nigeria sole export commodity, crude oil is determined in dollar, so to them it was a common sense that since we do not determine the price of crude oil, devaluation will not be in our favour.
Therefore, the central bank in its wisdom chose to fix the exchange rate at 197 naira to the dollar and decided to allocate the hard currency to sectors it deems fit require it. What we have is a class of privilege companies and individuals who have access to the foreign exchange reserves of the country at a subsidies rate while the rest are pushed to scramble for the crumbles at the parallel market.
Their argument was that those privileged ones who have access to the dollar on the official window would use the allocation to develop local capacity for productions of essential goods and service that will catapult the economy back to life.
However, at the current rate of 400 naira to the dollar in the black market as at Monday, the margin between the official window and the parallel market rates have widen to 203 naira on each dollar.
What this means is that if an eligible transaction on the official window sail through at 197 to a dollar with about $10 million purchased to import goods or raw material for manufacturing, the company or individual involved will think twice before actually carrying out the legitimate transaction.
By the time you multiply $10 million by 203 naira, what you get is 2.03 billion naira profit when such money is arbitraged. Common sense will tell us that the profit margin is so tempting that the person or company that is able to get such allocation from the official market would rather want to take the risk of arbitraging than to carry out the original purpose s/he or firm obtained the money from the official window. Giving the stress and other unstable factors in the economy today, most participants at the official interbank foreign exchange market would rather divert the money to the market and make cool profit in collaboration with some unscrupulous officials who will be happy to take a bite from the national cake.
The government should consider the implications of subsidizing the rich at the expense of the poor. By implications, the current exchange rate policy of the central bank of Nigeria (CBN) is more favourable to the elites than the so-called poor it was meant to protect.
Nigeria is bleeding and some blood sucking demons at the CBN are smiling to the bank, telling President Mohammadu Buhari that fixing the exchange rate is the best to support the poor.
The revelation that some directors of the CBN were conniving with bureau de change operators to defraud the nation should be enough signals to what is obtained at the regulatory bank. Merely profiting from the misfortune of the nation has always been the prerogative of the elites and those who have the privilege of been at the leadership of the economy management.
The first step toward rescuing Nigerians from the economic stagnation is to allow a free float exchange rate that will enable the naira to discover its true value or appropriate price. Let the government focus on developing the other neglected sectors of the economy and encourage local manufacturing of products that will have impact on the lives of the common man. Let the government diversify the economy in such manner that we can start promoting locally manufactured good for both export and local consumption.
The short term pain of devaluation can not be compared with its long term gain. If the import become so expensive due to devaluation of the naira, then people can start looking inward for the alternative locally. Nations like China closed its door for importations of foreign good for many years before they finally opened up some years back, today the Asian country is a world power having developed local capacity that could overwhelm the entire world.
Let the elites that are always in need of the dollar pay the appropriate price for the commodity.
Government should with a matter of urgency sack the current governor of the central bank, Godwin Emefiele, he has outlived his usefulness in the management of the monetary policy. Rather than protecting the poor, his policy of administrative control of the exchange rate has brought more hardship to the ordinary Nigerians. Same way his introduction of maintenance fee on bank accounts of depositors has increased the exploitation of the ordinary Nigerians by the lazy armchair bankers.
Now banks are let loose on the common man with the introduction of arbitrary charges called maintenance fee, raking in millions of profit doing nothing.
It's time the Buhari administration redefine its economic policy, set up a team of experts that will holistically appraise our present economic situation as a nation and work out modalities for the way forward.
This is the only way Nigerians can truly believe the Buhari administration is meant to serve the cause of the common man and not the interest of the same elites that have consistently exploit weak economic policy to their best interest.
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| Emefiele, CBN boss |
Few years ago, Nigeria was earning an average of $114 per barrel of oil and instead of expanding our industrial base, build infrastructure and genuinely invest in the welfare of the citizens, our government was busy sharing the commonwealth among the elites to the detriment of all. Today, not only the nation’s currency that is going through tough time, the entire economy is in a state of comatose, inflation is gradually rising while everywhere you go, poverty is fast accelerating.
The major issue on the mouth of most Nigerians, surprisingly including the market women and ordinary Nigerians on the street is the exchange rate of the nation’s currency.
The debate has been either to devalue the naira or continue to maintain the culture of fix exchange rate, which allow the central bank to administratively determine the exchange rate of the naira rather than allow market forces. President Mohammadu Buhari has came out boldly to tell the whole world he was not ready to “kill the naira,” by this he meant he was not willing to succumb to the advice of the economists and foreign investors advocating that a more flexible exchange rate, determine by the forces of demand and supply should be allowed.
From both the President and CBN perspective, fixing the exchange rate will protect the interest of the common man and reduce the impact of imported inflation on the economy. It was argued that Nigeria sole export commodity, crude oil is determined in dollar, so to them it was a common sense that since we do not determine the price of crude oil, devaluation will not be in our favour.
Therefore, the central bank in its wisdom chose to fix the exchange rate at 197 naira to the dollar and decided to allocate the hard currency to sectors it deems fit require it. What we have is a class of privilege companies and individuals who have access to the foreign exchange reserves of the country at a subsidies rate while the rest are pushed to scramble for the crumbles at the parallel market.
Their argument was that those privileged ones who have access to the dollar on the official window would use the allocation to develop local capacity for productions of essential goods and service that will catapult the economy back to life.
However, at the current rate of 400 naira to the dollar in the black market as at Monday, the margin between the official window and the parallel market rates have widen to 203 naira on each dollar.
What this means is that if an eligible transaction on the official window sail through at 197 to a dollar with about $10 million purchased to import goods or raw material for manufacturing, the company or individual involved will think twice before actually carrying out the legitimate transaction.
By the time you multiply $10 million by 203 naira, what you get is 2.03 billion naira profit when such money is arbitraged. Common sense will tell us that the profit margin is so tempting that the person or company that is able to get such allocation from the official market would rather want to take the risk of arbitraging than to carry out the original purpose s/he or firm obtained the money from the official window. Giving the stress and other unstable factors in the economy today, most participants at the official interbank foreign exchange market would rather divert the money to the market and make cool profit in collaboration with some unscrupulous officials who will be happy to take a bite from the national cake.
The government should consider the implications of subsidizing the rich at the expense of the poor. By implications, the current exchange rate policy of the central bank of Nigeria (CBN) is more favourable to the elites than the so-called poor it was meant to protect.
Nigeria is bleeding and some blood sucking demons at the CBN are smiling to the bank, telling President Mohammadu Buhari that fixing the exchange rate is the best to support the poor.
The revelation that some directors of the CBN were conniving with bureau de change operators to defraud the nation should be enough signals to what is obtained at the regulatory bank. Merely profiting from the misfortune of the nation has always been the prerogative of the elites and those who have the privilege of been at the leadership of the economy management.
The first step toward rescuing Nigerians from the economic stagnation is to allow a free float exchange rate that will enable the naira to discover its true value or appropriate price. Let the government focus on developing the other neglected sectors of the economy and encourage local manufacturing of products that will have impact on the lives of the common man. Let the government diversify the economy in such manner that we can start promoting locally manufactured good for both export and local consumption.
 |
| Dollars |
The short term pain of devaluation can not be compared with its long term gain. If the import become so expensive due to devaluation of the naira, then people can start looking inward for the alternative locally. Nations like China closed its door for importations of foreign good for many years before they finally opened up some years back, today the Asian country is a world power having developed local capacity that could overwhelm the entire world.
Let the elites that are always in need of the dollar pay the appropriate price for the commodity.
Government should with a matter of urgency sack the current governor of the central bank, Godwin Emefiele, he has outlived his usefulness in the management of the monetary policy. Rather than protecting the poor, his policy of administrative control of the exchange rate has brought more hardship to the ordinary Nigerians. Same way his introduction of maintenance fee on bank accounts of depositors has increased the exploitation of the ordinary Nigerians by the lazy armchair bankers.
Now banks are let loose on the common man with the introduction of arbitrary charges called maintenance fee, raking in millions of profit doing nothing.
It's time the Buhari administration redefine its economic policy, set up a team of experts that will holistically appraise our present economic situation as a nation and work out modalities for the way forward.
This is the only way Nigerians can truly believe the Buhari administration is meant to serve the cause of the common man and not the interest of the same elites that have consistently exploit weak economic policy to their best interest.
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