Eight months into Godwin Emefiele’s ‘’Managed Float Exchange Rate System” – the verdict, at least so it appears, is that all is far from being well. If anything, things have gone much worse, not better, with the forex policy introduced in June last year. As predicted (or prophesied?), the naira has finally crossed the N500 line to the United States dollar; indeed, in the last two weeks, it has oscillated between N506 to N516. And so, the debate on whether the system can claim to have served the country well in the last eight months has ceased to be academic: it is the reality we now live with.
Little wonder, the governors at the National Economic Council, (NEC) on Thursday last week demanded an immediate review of the policy by the Central Bank of Nigeria (CBN). What they had in mind, they wouldn’t say. Be that as it may, the surprise is that it took them eight months to come to that conclusion.
Talk about the CBN being on the spot, weeks before, the cyber-sphere had been awash with all manners of theories – ranging from the outlandish to the harebrained –alleging serious economic crimes against the monetary authorities. Part of the frenzy of finding who to blame for the naira’s one-way trip to the Golgotha was to cast the Central Bank of Nigeria governor, Godwin Emefiele, in the lead of Project Kill the Naira! And as if determined to pour fuel into the raging inferno, Attorney General of the Federation and Minister of Justice, Abubakar Malami (SAN), reportedly issued the apex bank governor a query ostensibly to explain the charges – which I consider too base to list here – charges that may well have been dredged up from the vacuous rumour mill!
Of course, these are interesting times. Soon enough, there would be enough blames to go round for everyone.
For now, where do we go from here? From managed to the floating exchange rate regime, what next? We have turned full cycle. The former, despised for its rigidity – never mind that we had some semblance of stability – was blamed for sundry ills plaguing the economy. The latter, for all its pretences to the allocative power of the market has been a disaster (if it worked, we probably would not be talking of landing in the cesspit of recession).
Trust the manufacturer who could not access forex; the parent who could not remit wards’ fees to the college in a foreign university, the sundry importer whose 41-odd items were declared ineligible for official forex by Emefiele’s CBN, there is no telling the difference between the old and the new. Not even a good word from our hordes of analysts for whom the thriving black market is sufficient proof of the blind alley that the two policies have left us! Eight months on, we may have just realised how badly the Nigerian ailment has been misdiagnosed.
Here is what I wrote eight months ago when I first observed our obsession with forex management. The quest, I had reasoned, “stems from a fundamental misdiagnosis of the problem”. The problem, I had argued, being “more fundamental, touches on the ability of the economy to renew itself… the problem comes down to the tragedy of a nation that relies on a single commodity for all its forex; one that spends a disproportionate chunk of its forex on imports”.
Needless to state that I have been proven right. Few weeks later I had also warned on this page: “Had the economy’s minders spent as much time on how to get the economy on its feet as they have done on figuring out the arithmetic of sharing the shrinking piggy bank, we would probably be well on the way to developing the concrete policies to get some our critical industries revving back to life and to boost our forex stock”.
Today, we seem set for the same old prescriptions that brought us here in the first place. Never mind that the CBN has shouted itself hoarse; it appears that nobody is listening. The problem, says the apex bank, is that it does not have enough forex to go round! Unfortunately, unlike the naira which it has the liberty to print, the dollar is a no-go area.
Yet, we expect the naira to rebound by throwing it to the market hounds. And while we can do nothing about increasing the stock of forex in the piggy bank, we are also not prepared to give up our love for those exotic items that consume a huge chunk of our forex! And while Emefiele fails to play the magician, we demand that his head be served on the platter!
Just imagine the club of whiners. As it was in the very beginning, so it is even now: manufacturers, traders, contractors, portfolio investors to shady operators; name them; all them permanently on queue for forex. The range of demands is such that makes it tempting to assume that dollar has suddenly become the local medium of exchange. How could anyone not have foreseen the current unidirectional move of the naira more so at a time the supply of forex had severely contracted?
Merely by the amount of pressure brought to bear on Emefiele’s CBN in the last few days, expect to see some hastily packaged policies to ameliorate what is essentially a structural problem – something that requires deep thought as against superficial obsession with forex management.
But then, that is the way of a people that would rather treat symptoms than tackle the disease.
Finally, I need to highlight another fundamental problem that the minders of the economy continue to ignore. Today, Nigerians worry that segment of that so-called parallel market has grown wings to the extent that it now plays the reference rate while the official inter-bank rate acts the adjunct. The question is: what are the monetary authorities doing about it? We are talking here of the club of unscrupulous actors known not only to prey on the system but have since become an atavistic force. What would it require to take them on? Why does the federal government prefer to feign helplessness in the face of their brutal assault on the nation’s currency? And where in the world, save Nigeria, are foreign currencies hawked on the highways as you would ‘pure water’?
What is the role of the Bureau de Change in the equation? By rule, they are supposed to serve the lower end of the market. Do they? Given that the latter operate strictly by its own opaque codes, what is the chance in a million that the CBN will ever be able to bring this segment within the loop of its forex management?
Is anyone still talking about respite for the naira?
Little wonder, the governors at the National Economic Council, (NEC) on Thursday last week demanded an immediate review of the policy by the Central Bank of Nigeria (CBN). What they had in mind, they wouldn’t say. Be that as it may, the surprise is that it took them eight months to come to that conclusion.
Talk about the CBN being on the spot, weeks before, the cyber-sphere had been awash with all manners of theories – ranging from the outlandish to the harebrained –alleging serious economic crimes against the monetary authorities. Part of the frenzy of finding who to blame for the naira’s one-way trip to the Golgotha was to cast the Central Bank of Nigeria governor, Godwin Emefiele, in the lead of Project Kill the Naira! And as if determined to pour fuel into the raging inferno, Attorney General of the Federation and Minister of Justice, Abubakar Malami (SAN), reportedly issued the apex bank governor a query ostensibly to explain the charges – which I consider too base to list here – charges that may well have been dredged up from the vacuous rumour mill!
Of course, these are interesting times. Soon enough, there would be enough blames to go round for everyone.
For now, where do we go from here? From managed to the floating exchange rate regime, what next? We have turned full cycle. The former, despised for its rigidity – never mind that we had some semblance of stability – was blamed for sundry ills plaguing the economy. The latter, for all its pretences to the allocative power of the market has been a disaster (if it worked, we probably would not be talking of landing in the cesspit of recession).
Trust the manufacturer who could not access forex; the parent who could not remit wards’ fees to the college in a foreign university, the sundry importer whose 41-odd items were declared ineligible for official forex by Emefiele’s CBN, there is no telling the difference between the old and the new. Not even a good word from our hordes of analysts for whom the thriving black market is sufficient proof of the blind alley that the two policies have left us! Eight months on, we may have just realised how badly the Nigerian ailment has been misdiagnosed.
Here is what I wrote eight months ago when I first observed our obsession with forex management. The quest, I had reasoned, “stems from a fundamental misdiagnosis of the problem”. The problem, I had argued, being “more fundamental, touches on the ability of the economy to renew itself… the problem comes down to the tragedy of a nation that relies on a single commodity for all its forex; one that spends a disproportionate chunk of its forex on imports”.
Needless to state that I have been proven right. Few weeks later I had also warned on this page: “Had the economy’s minders spent as much time on how to get the economy on its feet as they have done on figuring out the arithmetic of sharing the shrinking piggy bank, we would probably be well on the way to developing the concrete policies to get some our critical industries revving back to life and to boost our forex stock”.
Today, we seem set for the same old prescriptions that brought us here in the first place. Never mind that the CBN has shouted itself hoarse; it appears that nobody is listening. The problem, says the apex bank, is that it does not have enough forex to go round! Unfortunately, unlike the naira which it has the liberty to print, the dollar is a no-go area.
Yet, we expect the naira to rebound by throwing it to the market hounds. And while we can do nothing about increasing the stock of forex in the piggy bank, we are also not prepared to give up our love for those exotic items that consume a huge chunk of our forex! And while Emefiele fails to play the magician, we demand that his head be served on the platter!
Just imagine the club of whiners. As it was in the very beginning, so it is even now: manufacturers, traders, contractors, portfolio investors to shady operators; name them; all them permanently on queue for forex. The range of demands is such that makes it tempting to assume that dollar has suddenly become the local medium of exchange. How could anyone not have foreseen the current unidirectional move of the naira more so at a time the supply of forex had severely contracted?
Merely by the amount of pressure brought to bear on Emefiele’s CBN in the last few days, expect to see some hastily packaged policies to ameliorate what is essentially a structural problem – something that requires deep thought as against superficial obsession with forex management.
But then, that is the way of a people that would rather treat symptoms than tackle the disease.
Finally, I need to highlight another fundamental problem that the minders of the economy continue to ignore. Today, Nigerians worry that segment of that so-called parallel market has grown wings to the extent that it now plays the reference rate while the official inter-bank rate acts the adjunct. The question is: what are the monetary authorities doing about it? We are talking here of the club of unscrupulous actors known not only to prey on the system but have since become an atavistic force. What would it require to take them on? Why does the federal government prefer to feign helplessness in the face of their brutal assault on the nation’s currency? And where in the world, save Nigeria, are foreign currencies hawked on the highways as you would ‘pure water’?
What is the role of the Bureau de Change in the equation? By rule, they are supposed to serve the lower end of the market. Do they? Given that the latter operate strictly by its own opaque codes, what is the chance in a million that the CBN will ever be able to bring this segment within the loop of its forex management?
Is anyone still talking about respite for the naira?
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