After decades long of word counts and verbal exchanges on Naira devaluation and “oil subsidy removal”, yours sincerely is truly contestation weary on the twin policy issues. I am indeed debate fatigue on the twin standard policies in the contemporary neoliberal toolkit of International Monetary Fund (IMF) for developing economies often to balance budgets as distinct from meeting development objectives. Happily too, the constitution envisages Nigeria as a functioning economy with goal of maximizing welfare and security for all not a debating society on policies informed by received wisdom and vested interests. It’s time to get Nigeria working again as it was during the 1st, 2nd and 3rd Development Plans of the 50s, 60s, 70s as opposed to wreckage of the economy as it was during the IMF’s Structural Adjustment Program ( SAPS) and “reforms” of the 80s, 90s till date.
I agree with the Central Bank Governor, Godwin Emefiele that Nigeria’s official exchange rate should not be determined by the parallel market where the naira value is perpetually depressed for speculative greed as distinct from development objectives. I certainly commend the recent measures of Central Bank of Nigeria (CBN) aimed at shoring up the value of the Naira.
Last week, Naira reversed its depreciation trend, recording some N20 gain against the United States Dollar closing at N470 per dollar. This development was due to what observers attributed to the new rules introduced by the CBN, which allowed beneficiaries of diaspora remittances and foreign exchange transfers into domiciliary account, and collect the proceed in foreign currency cash. CBN’s Monetary Policy Committee ( MPC) met on Monday 23rd and Tuesday 24th November. The Committee was right to resist the pressures to bench mark the real value of Naira with speculative parallel market rates. On the contrary the Committee commendably maintained its “policies on exchange rate and financial system stability to attract more investment into the Nigerian equities market”. The International Monetary Fund (IMF) has repeatedly urged the Central Bank of Nigeria (CBN) to get the country “a unified exchange rate for the naira”. This is an unacceptable euphemism for further devaluation, because “unifying” official with open ended footloose street rate is not only attainable but far from the desirable. The International Monetary Fund has urged the central bank to allow “more flexibility in its preferred window to reduce the demand in the parallel market”. That is false and least resistance approach to exchange rate management. Nigeria needs no “flexibility” of rate but stability of rate for effective investment planing.
Currency devaluation in a dependent developing economy like Nigeria is “false economics”. Naira’s worth was better determined by official market fundamentals aimed at driving growth and development rather than the insatiable urge of currency speculators for unearned profits on the streets. CBN should resist policy dictatorship from whatever local or foreign quarters. CBN has the mandatory autonomy to manage the exchange rate and ensure financial stability. Emefiele puts it better: “We do not agree that the determining factor for our currency should be based on a market that is tainted, where people go to offer bribes,” “The black market is illegal where people do not provide documentation to support transactions. It is unfortunate and unfair for analysts to say Nigeria’s exchange rate is at 480 per dollar,”. “A depreciation of the local currency by 24% this year is huge compared to other countries like India, Indonesia, Russia or South Africa”. The point cannot be overstated that Nigeria depends on imported inputs for industrial production. An unmanaged exchange rate with its attendant free fall and devaluation would further increase the cost of production, erode fixed wage income, making the country uncompetitive, worsen income poverty and make economic recovery intractable. The rising inflation and price of food stuff despite the efforts of the CBN to maintain price stability tasks the fiscal authorities to hit the ground running to incentivize for industrial production, curb rising insecurity which has undermined agricultural production in the rural areas. The fiscal authorities in Ministries of trade and investment, interior and agriculture should compliment CBN’s measures and stabilize the economy through appropriate industrial, agricultural and security policies that would stimulate and guarantee seamless productivity in the country. Already CBN’s development financing interventions in transportation, agriculture, cotton and textile sub-sectors, oil and gas sector aimed at self reliance and domestic production have been acknowledged and commended. We import everything, including industrial inputs while we export no industrial good that can take the advantage of any guided devaluation. So devaluation is not an option for now. I recall that in February 2011, Central Bank under Lamido Sanusi resisted the pressure of the International Monetary Fund (IMF) to devalue the naira. Nigeria must rethink outside the box of neo- liberal IMF’s unhelpful policies of devaluation. Nigeria needs a new paradigm of bold policy choices and new star-words in place of boring ideological mantra of devaluation.
We must urgently reindustrialize; stop the criminal wholesale smuggling and dumping of inferior goods, lower the interest rate, ensure long term development financing, de- subsidize the political/ruling class, reinvent refineries, put restrictions on goods that we have, comparative advantages such as textiles, rice, poultry goods, re-invent the railways, fix the un-motorable roads through, public works, re-electrify the country and create millions of decent work for youths who have proven to be vulnerable to insurgency, kidnapping and violent serial gangsterism. Nigeria
needs holistic bigger plan for development like China, India, EU not micro- mutually destructive policies of devaluation and kneel jerk periodic “subsidy removal”. The Governor of CBN, Mr. Godwin Emefiele is right in managing the scarce foreign reserve through restrictions on some frivolous imports. Nigeria more
than any nation currently suffers huge capital inadequacy, with foreign currency reserves sharply falling. CBN’s measures aimed at capital application and capital control will definitely enhance domestic production in place of unhelpful luxury imports.
On security, Nigeria needs urgently bi- partisan statesmanship through cooperation by states and non- state actors to confront banditry and criminal violence. The recent nation- wide concerns about growing insecurity are welcome, but Nigeria should not be a debating society but a functioning secured Republic. Blame games and calls for resignations of President or service Chiefs are not helpful. In fact acrimonies and discordant voices only benefit criminals. What is needed is bi-partisan cooperation to confront insecurity and the burden is on President Buhari to rally the nation against growing threats to lives and livelihoods. The lasting solution to physical insecurity is economic security which can only come through Industrialization that ensures decent jobs for millions of unemployed youths across the Federation.
ISSA Aremu Member National Institute Kuru Jos