Devaluation of the naira - A poke in the eye

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.