A scathing assessment of the CBN’s strategy for reducing the increasing demand pressure on the Naira was recently published by “The Economist,” which is a UK based internationally respected magazine. ‘The Economist’ in its report titled “Nigeria’s Currency: ToothPick Alert” has clearly drawn the ire of the management of the Central Bank of Nigeria.
The anonymous author, for example, describes the process which determined the 40 imported items, which were recently excluded from access to official foreign exchange, as “if the hit list was drawn up by someone wandering around a home and a building site and randomly pointing at items”.Even if, CBN dismisses the title of the report as harmless satire, the author clearly pulled no punches in its scornful portrayal of the interventions of our Apex Bank in the foreign exchange market as akin to that of a bungling clown.
The story further embellished the image of CBN as a comic delight, when it inexplicably gives prominence to Indian incense, toothpicks, as some of the banned items, while forex prohibition for rice and tinned fish importation, which consume more forex appear as an addendum to the less basic items earlier listed.
Nonetheless, the report, considers the official forex ban on tinned fish and rice as a counterproductive measure “for a country that does not produce enough of these things to feed itself, but no matter”, the anonymous author cynically noted “Nigeria must be shielded from foreign sardines”! The writer’s choice of sardines and toothpicks as its perceived spearhead of threats to Nigeria’s security is probably an attempt to ridicule the futility of CBN’s exclusion of those forty items from official forex sources.
Furthermore, the author, with an air of presumed superior wisdom, also warns with apparent altruism, that CBN’s attempt to “puff up the Naira’s exchange rate could cause untold harm to Nigeria’s economy”, as “Emefiele’s policy would (inadvertently) precipitate higher inflation and further weaken the Naira”.
The report’s coup de grace, however, is the brazen condemnation of Emefiele’s managerial incompetence when compared with the performance of the former CBN Governor, Lamido Sanusi, who according to the writer, “was the toast of overseas investors until he was sacked for exposing corruption by Jonathan’s government”.
The author of “Toothpick Alert”, is consequently perplexed at Nigeria’s odd preference, since according to him “if investors (overseas) do not have confidence in Emefiele as successor, which, would have been the worse option for Nigeria: allowing erstwhile Governor Sanusi to serve another four years or undermining the independence of the Central Bank by sacking him”.
Inspite of the clearly rambling unedited colloquial presentation of the story, the no holds barred, frontal attack may inform that the author possibly has an axe to grind with Emefiele as CBN Governor. Alternatively, the author may know next to nothing of the structure or the primary drivers and brakes in the Nigerian economy.
What is clear from ‘The Economist’ story, however, is the overriding message that investors want more Naira depreciation, so that speculative overseas investors can readily expand their portfolio of Nigeria’s listed equity for less dollar values. In pursuit of this objective, “The Economist” is ‘righteously’ alarmed that ‘instead of allowing the Naira to devalue” (the writer probably means depreciate as a currency does not unilaterally devalue itself) “the Central Bank is trying to defend the Naira rate by blocking imports”.
The author’s superficial understanding of the cause of the Naira’s unending depreciation is possibly an indication that he or she is clearly oblivious of the devastating impact and cause of the poison called “Excess Liquidity” on the Nigerian Economy. Evidently, our seemingly unyielding burden of excess Naira supply is clearly responsible for the steady slide in the rate of our national currency;
nonetheless, over an understanding of this primary causative factor of Naira depreciation would clearly still be discounted as useless input, so long as the actual object of ‘the Economist’ story is to robustly serve the interest of “blood thirsty” external sponsors and speculators who want to make whoopee on the back of a battered Naira, notwithstanding the deepening poverty and social dislocation that come with Naira devaluation and forex inflows which seek short term bonanza profits from the Nigerian securities market.
It is deceit for anyone to claim that the current low price of crude oil is directly responsible for a weaker Naira. Indeed, if such relationship is true, then the converse must also be valid; in other words, if crude prices should rise above $100/barrel, Nigeria will earn more revenue and the Naira should be stronger; but surprise surprise, how come no such major appreciation occurred in the Naira exchange rate, when crude oil price exceeded $140/barrel with regular output of well above 2million bpd, while Nigeria’s so called forex reserves exceeded $60bn.
Sadly, however, even if the language of ‘Toothpick Alert’ was mundane, with an analysis that lacked depth, CBN’s rejoinder in several full page advertorials was unnecessarily effusive and self depreciating response against a clearly cynical attempt to deliberately ridicule the efforts and strategy of the Apex bank to prop up Naira exchange rate.
Surely, the strategy of restricting scarce forex reserves to a nation’s relatively critical needs, which ‘The Economist’ scorned, has infact proved successful in several countries in encouraging local production and import substitution which also promotes increasing employment opportunities.
The preceding narrative should not for one minute suggest that CBN is on track with regard to appropriate Naira pricing. Clearly, so long as the enabling indices of CBN’s monetary instruments (inflation, cost of funds and exchange rate) remain out of gear, the exclusion of forex for rice and other intermediate raw materials will certainly trigger a general price rise, and also widen the gap between the black market and the official Naira exchange rate, to ultimately make the content of ‘Toothpick Alert’ a prophetic report.
Nonetheless, this need not be so if CBN finally accepts that our exchange rate dilemma will not be resolved by mere lip service to the role of demand and supply as the critical determinants of the constant intense pressure on the Naira exchange rate. Indeed, so long as the disenabling burden of untamed Naira surplus remains our habit, not even hundreds of billions of forex reserves will stop a cascading tumble of the Naira exchange rate and the attendant disastrous consequences for our economy and our social welfare.
Sooner than later, the CBN will have to admit that the monthly substitution of Naira allocations for dollar denominated revenue remains the major threat to the Naira exchange rate and our national security.
SAVE THE NAIRA, SAVE NIGERIANS