Rewane:NigeriaShouldFocusonItsEconomicInterest
A member of the Economic Advisory Council and Chief Executive Officer of the Financial Derivatives Company Limited, Mr. Bismarck Rewane, in this interview on ‘The Morning Show’onAriseTelevision,aTHISDAYbroadcaststation,shedsmorelightonthecontroversy surro
What is your take on Nigeria’s position on the Eco currency?
First of all, the way i see it is that the things outside our control are more than the things within our control. The global economic momentum, oil market, non-oil markets are driving economic decisions within economic domestic decisions. Therefore, you have to be strategic and tactical in your response. The Eco is taking over from the CFA Franc. The CFA started in 1945 and remains between the French treasury and the French- speaking African countries. So what happened? The arrangement was that French-speaking countries leave 50 per cent of their reserve in the French treasury and the French government guarantees a certain parity between the French franc at that time and the CFA franc. When the French joined the European Union (Custom Union) and the single currency, the French guaranteed parity between the CFA franc, in other words, guaranteed convertibility based on the French economy. Now, don’t forget that there were two types of colonial masters. There was a British colonial master which practiced indirect rule and the French system which practice assimilation. Nkrumah wrote a book called, ‘Neo-colonialism: The Last Stage of Imperialism.’ The time between the Custom Union and a single currency even in Europe took about 15 years. Between the Maastricht treaty Customs Union and then the Euro as a single currency, there were regional convergence criteria and it comes with many risks. Now, look, if you are in turbulence in an aircraft and they say if the oxygen mask drops, you first put it on your nose before you put on your child’s nose. But if you put it on the child’s nose and the child cannot help you, then both you and the child may go down if there is a crisis. Now, Nigeria is 66 per cent of the ECOWAS region, Nigeria is the biggest and largest economy in terms of population, size and all in Africa, Nigeria in my own judgement is not yet ready for currency convertibility at this stage. Currency convertibility has two stages - current account convertibility and capital account convertibility. So, you find that advance emerging countries like India are going towards current account convertibility. But if you are going into this arrangement, you will have both current account and capital account convertibility. The terms trade of Nigeria has deteriorated over the years. In other words, our exports have not been rising as fast as our imports. So, there are external sectors vulnerabilities. If we throw into this, the fact that we have to carry the baggage of all of these countries, then there is a problem. But, what has happened presently is that there is a change of name from the CFA to Eco. But the French said, you will no longer have to deposit 50 per cent of your reserve with us, which to me is a trap. That means that at any point in time, the French can say you are on your own.
I will like you to duel more on the politics of this arrangement. Don’t you think Nigeria’s decision to close its borders is also a factor?
I am not too sure. I think we are over estimating the impact of the border closure. It is a tactical response to with a strategic motive. In other words, Nigeria has to decide what role it wants to play in Africa. Nigeria stands to benefit more in regional integration. There is regional integration and there is a currency and Custom union issue. Regional integration means that you are an efficient manager of your own economy and you are going to carry that across to your neighbours. For example, if Aliko Dangote’s refinery is completed today, it will not be serving Nigeria only, it will be serving the whole of West Africa. We need a lot of infrastructure, pipelines to carry these things across to those places. So, Nigeria is the one that stands to benefit more from the economies of scale and regional integration. What the French has actually done is to say okay, if you still want to benefit from the regional integration then come and put your money where your mouth is, start taking responsibility for it. But if you don’t have that capacity to take responsibility, then come down.
Since the CFA has been changed to Eco, what does that mean to the naira, the CBN?
The value of the currency is either aligned or misaligned with its true value.
There are two things about a currency you must understand. Firstly, it is a medium of exchange. It doesn’t matter when they say the naira will exchange for whatever value the market thinks it is. There is also what is called the store of value. The store of value has to do with where do I keep my money in January, so that by December, it would not have lost much value. In the French-speaking countries, the average inflation rate is between one and two per cent, because it is guaranteed. Our rate of inflation is about 12 per cent, Ghana’s rate of inflation is about eight per cent. Now, where will you store your money? Where the rate of inflation is maximum one per cent or where the rate of inflation 12 per cent? The store of value will decide. So they will do transactions with Nigeria, but they will not store their money in Nigeria because of the rate of inflation or with Ghana. So, we are disadvantaged. However, from a long-term of micro-economic perspective, political independence is not the same thing as economic impendence. At one point in time these French countries will have to bite the bullet. Not now, maybe in the near term, but in biting the bullet these people are trying to put us at a strategic disadvantage. Another thing is on the border closure. You cannot have that border closed indefinitely. In any case, even if you put Customs officers in every kilometer, you will have to have the entire customs, because there are about 1800 kilometers of borders. So, this is a short term measure for it and the president alluded to it in a statement, that once the safe guards are there and the assurances are there, we would reopen the borders.
There has been so much talk around what is called the convergence criteria and we are told that only Togo has been able to meet that convergence criteria, what is your take on that?
You have to be careful before you jump into these things. The size of the Togolese economy is $63 million. Togolese economy is not bigger than the Festac economy. Lagos State is about 10 times the size of the Togolese economy. So, when you talk about economies, currencies and inflation, what does it take to manage Togo? It is not that much especially when you have the backing of the French. Togo is made up of two things to me - Ecobank headquarters and Asky airline that has its headquarters there. Apart from that, nothing else happens in Lome. I want to go back to the fact about what happens to the naira. The naira remains a stable currency, the naira serves the purpose of trading domestically and internationally for Nigeria. The naira is