De­val­u­a­tion of the naira - A poke in the eye

Daily Trust - - OPINION -

What makes the event is the venue. If Emir of Kano, Sanusi Lamido Sanusi had spo­ken from his Palace in Kano, as an opin­ion, it would have been an of­fen­sive faux pas. That Palace can reach any one in Nige­ria di­rectly, the high and the lowly. It must be as­sumed that Emir Sanusi has ac­cess to Pres­i­dent Muham­madu Buhari and could as well whis­per opin­ion on any­thing into the Pres­i­dent’s ear. But The Emir spoke at a func­tion in which he re­ceived a de­served Life Time Achieve­ment Award at the All Africa Busi­ness Lead­ers Award West Africa in La­gos. It was def­i­nitely not a venue where Sanusi could speak on mat­ters con­fined to the nar­row viewfinder of a monar­chy. The oc­ca­sion was not a Royal Hon­our, but rather an af­fir­ma­tion of pro­fes­sional and ser­vice ex­cel­lence to a quin­tes­sen­tial banker.

Some­thing about the way the me­dia re­ported Sanusi makes you squirm par­tic­u­larly if you are al­ready feel­ing the harsh pangs of an econ­omy on a free fall. What read­ily come to your mind is your in­abil­ity to ac­cess for­eign ex­change for your needs cat­e­go­rized among the 41 lux­ury items for which there are strict for­eign ex­change re­stric­tions. They range from up­keep of fam­i­lies abroad, school fees, and on to so­cial ap­petite items. The me­dia re­ported Sanusi as chiding the Cen­tral Bank of Nige­ria for not do­ing its job well, and in a man­ner that cur­rent Gov­er­nor Amiefele would be a saint if he did not find the com­ment a rough tackle from a sup­posed “friend of the CBN”.

But Emir Sanusi makes the log­i­cal ar­gu­ment that the Naira at about N200 at the of­fi­cial rate and about N225 on the Bu­reau De Change (BDC) seg­ment should not make any regime “pre­tend that the Naira is ap­pro­pri­ately val­ued.” Sanusi de­cried the de­mand man­age­ment ex­change pol­icy he had used when he was Gov­er­nor of the Cen­tral Bank. Ac­cord­ing to him, “at that time, we were at­tract­ing port­fo­lio flows and we needed to have a sta­ble ex­change rate, we need to have a healthy bal­ance of pay­ment sit­u­a­tion. The port­fo­lio flows are gone, in­fla­tion is al­ready upon us. We need to lower in­ter­est rate; oth­er­wise we com­pound an ex­change rate cri­sis for busi­ness, with high bor­row­ing cost and de­clin­ing de­mand”. Sanusi con­cluded rightly that “in the face of fall­ing oil prices, we are set­ting the econ­omy up for a long pe­riod of very low growth and we can­not af­ford that given our pop­u­la­tion and given our growth rate”. Sanusi fur­ther de­manded re­moval of petroleum sub­sidy, higher in­come and value added taxes.

With­out see­ing into the rea­sons, haters of the mes­sen­ger would re­ject the mes­sage as many did in the pas­sion­ate de­bate that Emir Sanusi’s pos­ture has gen­er­ated.

The Nige­rian Labour Congress re­act­ing through its Deputy Pres­i­dent, Com­rade Issa Aremu, said “the Naira in re­cent time has lost its value so dras­ti­cally as to have fur­ther eroded wage in­come of mil­lions of work­ers (many with un­paid monthly salaries) wors­en­ing in­come poverty.

“De­val­u­a­tion has also in­creased the cost of do­mes­tic pro­duc­tion, fu­eled price in­fla­tion and un­der­mined the com­pet­i­tive­ness of lo­cally sur­viv­ing in­dus­try, lead­ing to loss of ex­ist­ing few jobs. Fur­ther de­val­u­a­tion of the Naira, as Emir Sanusi rec­om­mended, is an un­ac­cept­able ex­change rate pol­icy overkill.” Com­rade Aremu de­scribed Emir Sanusi’s po­si­tion as “false economics in a non­ex­port­ing, im­port de­pen­dent econ­omy like Nige­ria. We im­port ev­ery­thing, in­clud­ing in­dus­trial in­puts, while we ex­port no in­dus­trial good that can take the ad­van­tage of de­val­u­a­tion”.

The Cen­tral Bank of Nige­ria (CBN) has dis­missed Emir Sanusi’s call for fur­ther de­val­u­a­tion through CBN Deputy Gov­er­nor, Cor­po­rate Ser­vices Direc­torate, Mr. Ade­bayo Ade­labu with the as­ser­tion that “We are all aware of the CBN’s of­fi­cial po­si­tion on this, that there will not be any fur­ther de­val­u­a­tion of the naira, and this has been com­mu­ni­cated.” “We have made the of­fi­cial po­si­tion known to the pub­lic.” To fur­ther close the chap­ter, Pres­i­dent Buhari has said that “I don’t think it is healthy for us to have the Naira fur­ther de­val­ued”.

Much as Emir Sanusi’s logic may sound con­vinc­ing, the re­al­ity that looms large when his ad­vice is taken is clear to see. Al­ready in­fla­tion is high in an econ­omy that im­ports ev­ery­thing from tooth picks to rice. De­val­u­a­tion will cer­tainly dou­ble prices of es­sen­tial goods and ser­vices. In a coun­try whose work­ing pop­u­la­tion is de­cid­edly salary earn­ing, de­val­u­a­tion will spark a wave of labour pres­sure and un­rest for in­creased wages. Also, most state gov­ern­ments have wage bills that stand at be­tween 60% to 80% of earned sub­ven­tions and re­trench­ment a satanic thought, it is hard to ac­cept Emir Sanusi’s ad­vice as ad­vice from a friend with good in­ten­tions. Nige­ria needed a man­ager af­ter Pres­i­dent Good­luck Jonathan, not a dam­ager. De­val­u­a­tion to­day would dam­age the coun­try that is con­sid­ered a dry twig. You don’t bend it as fast as you would, a fresh one. Fer­vently needed is fis­cal and at­ti­tu­di­nal dis­ci­pline. Nige­ria must first block all leak­ages of earn­ings. The coun­try must sup­press and re­duce cor­rup­tion. Bla­tant thiev­ery through ex­ces­sive earn­ings for elected of­fi­cers and pub­lic ap­pointees should be high­lighted and stopped. Peo­ple must change their lean­ing on wants in­stead of needs. More par­tic­u­larly, North­ern States must face the se­cu­rity sit­u­a­tion holis­ti­cally by adopt­ing com­mon mea­sures against youth rad­i­cal­iza­tion. The Gov­er­nors must ad­dress ed­u­ca­tion specif­i­cally for the over 10 mil­lion school age chil­dren out of school. Gov­ern­ments must re­vive agriculture for food suf­fi­ciency, lower prices and even ex­port to our drought prone neigh­bor­ing coun­tries. This is the eco­nomic base to strengthen be­fore we can then con­tem­plate de­val­u­a­tion.

Nige­ria is a rich coun­try, her peo­ple, hard work­ing, proud and re­silient. With the ap­pro­pri­ate poli­cies, we should be able to se­cure our needs lo­cally first, to ease the pres­sure and de­mand for for­eign ex­change. For now and in the restive po­lit­i­cal climes we are in, de­val­u­a­tion of the Naira ap­pears to me, a blind­ing poke in the eye.

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