For a nation like Nigeria which is in a hurry to develop, having a leadership that is belligerent by dwelling constantly on the past can be a huge liability and the current government seems to be exhibiting such bellicose tendencies.
One of the commonest counterarguments to the indictment of being slow from government angle is that President Muhammadu Buhari inherited a badly battered economy from President Goodluck Jonathan, hence he had to take an unusually long period to settle down to do the job.
But l would contest that position by pointing out that in 2008, when Barack Obama, the outgoing US president, took over the reins of government from George W Bush, the economy was worse than it was in Nigeria last year. That’s because the US was fighting two terrorism-related wars at the same time, unlike Nigeria that has been fighting Boko Haram insurgency.
Rather than engage in a blame game of recounting Bush’s failures, Obama rolled up his sleeves and introduced policies like economic stimulus package to revive US firms and create jobs which was first introduced by renowned economist John Maynard Keynes, father of supply side economics, as a panacea for the Great Depression of 1933.
Due to lack of economic management dexterity, even digging the economy out of recession has become such an arduous task.
For instance, apart from pegging the naira over a long period before floating it last June, the Buhari government has now decided to use brute force to maintain the false foreign currency price by arresting BDC operators who sell FX above government stipulated rate.
Is that not a backdoor way of introducing price control? What such an application of brawn instead of brain which is tantamount to command and control economy of the early 1980s does, is further drive the forex market underground and send wrong signals or shock waves to investors-international and local- that that the nation is relying on for the much sought after Foreign Direct Investments.
What happened to the concept of market forces driven economy which Nigeria is supposed to be operating?
It is my belief that the distribution of forex was shifted to the BDCs by the CBN to absolve itself of accusations that banks were being favoured in the allocation, particularly because the current governor is from the stock of commercial bankers.
But as it has turned out, the BDC operators who function in less structured business environment and without strict prudential guidelines like Deposit Money Banks, have proved to be worse than bankers in the distribution of forex to end users, hence the crackdown, so the nation is now in a quandary as forex dries up.
But the problem is not with the distribution of forex but the supply.
Even with oil price rising to $60 per barrel, without fixing the conflict in the Niger Delta, oil output will not improve and would FX supply not increase.
With fears amplified by the unpredictability of government being nursed by entrepreneurs and citizens alike, industries are grinding to a halt owing to the inability to import raw materials and other inputs.
Airlines too have reduced flights into Nigeria as they now source aviation fuel from our neighbours, Ghana, or shut down operations completely due to inability to remit proceeds from sales of tickets back home. Exacerbating the matter further, the airlines that are still operating into Nigeria, now demand for payment in dollars instead of naira.
That means that every Nigerian travelling abroad is prospecting for the dollar, not just for spending abroad as Nigerian debit and credit cards are no longer functional, but also to purchase tickets.
All the activities above lead to the increase in dollar value while the value of the naira keeps falling because, it is believed that airlines box the dollar proceeds from sale of tickets in Nigeria and send the funds to their home countries in crates.
With such illegal activities, perhaps, airlines would be the next target of the Department of State Services raid after the onslaught on the BDCs.
As ldi Amin Dada, the late Ugandan dictator, once charged at his country’s central bank governor, “You call Ugandan money, shit money?”
The dictator infamously made the comment in response to the apex bank governor who refused to print more money and told the implacable president that at that point in time, Ugandan money was like shit money owing to the battered state of the nation’s economy.
God forbids that the naira descends to such an embarrassing level of becoming shit money.
Ominously, indications are that exchange rate in the parallel market may hit the $1-N500 soon. In elementary economics, class teachers often illustrated hyperinflation with incidents in Germany during the 1930s economic recession whereby people bought a cup of tea, and between the time it took to drink the tea and return for a second cup, the price had gone up dramatically.
Back in the days, when teachers regaled us with such stories, they appeared quaint, but with the galloping rate of inflation in Nigeria today whereby a packet of cereal bought a few days earlier, would cost at least 20 per cent more, a couple of days after in the same shop, those recession days stories don’t sound surreal anymore as the current rate of inflation at over 18 per cent elicit some kind of déjà vu.
To demonstrate integrity, and democratisation of forex allocation, the CBN recently resorted to publishing the amount of forex sold to the various sectors with the manufacturing sector taking the lion’s share, while airlines received a modest share of nearly one billion dollars.
In my considered opinion, no matter how well-intentioned, the allocation of resources, be it forex or essential commodities, which is reminiscent of command and control, as opposed to the market-driven economy, will likely not fix the unbridled demand for forex by Nigerians.
Worse of all, it’s a throwback to Buhari’s first coming as military head of state between December 1983 and 1985 when trade by barter, price control and distribution of essential commodities like milk and sugar were the order of the day.
It’s needless for me to reemphasise that investors are like elephants, they have long memory banks, so they remember a lot, hence they are getting more wary and skittish.
What’s the possible panacea for the economic bind in Nigeria reflected in the severe dearth of FX?
In the absence of the return of crude oil price to the $100 per barrel range, which is not in the horizon despite the cut in oil output by OPEC, because at higher price, shale from the USA oil will become viable again and that may compel Saudi Arabia and co to increase supply again and drive price down.
Given the scenario above, a combination of some commonsense monetary and fiscal measures may help to rescue the economy.
For starters, what on earth informed the CBN’s decision to pursue the policy of baring Deposit Money Banks from accepting forex deposits before it was reversed? Now local and international firms that generate dollars locally have perfected ways of repatriating the funds without banks. The policy of placing 41 items on prohibition list for sourcing of FX has also exacerbated the situation by pilling more pressure on the foreign on non-CBN sources as importers started adopting all antics to source FX by hook or by crook, so they found willing partners in the BDC operators.
Also, how about taking a second look at the policy that mandates the opening of domiciliary accounts by Nigerians?
Could that policy be driving the demand for forex as more Nigerians now appear to prefer storing their wealth in foreign currencies like dollars and pound sterling in their domiciliary accounts instead of naira?
By the same token, could the introduction of cashless policy supported by the use of Bank Verification Number to track account holders which helps financial and security authorities keep track of funds movements within the country be having unintended negative effects? Could that be the reason more Nigerians change naira into forex and keep the same at home due to its portability which means huge sums can be kept out of the prying eyes of authorities like the CBN and security agencies? It is my understanding that dollars can be stored for over a long period and it will not deteriorate in quality but when naira is stored, it starts emitting foul odour, and that probably accounts for why most Nigerians trying to hide money from the prying eyes of government agencies do so in dollars, and it is a practice that further erodes the value of the naira.