BY KENNETH EZE
Consultants, analysts, financial experts and investment bankers have identified lax fiscal and monetary policies, poor choices and wrong decisions, commoditisation of currencies, dollarisation of the domestic economy and greed as factors responsible for the free fall of the Nigerian naira at the foreign exchange market.
The local currency, now exchanging at N575 per dollar, has declined by over 200 per cent since June 2014 when the current governor of the Central Bank of Nigeria, Godwin Emefiele, assumed office.
“We are here because of wrong decisions and poor choices,” Data and Information Consultant, Babajide Ogunsanwo, said, while warning that Nigeria needs to start “thinking rather than believing.”
In a television programme monitored by The Point, Ogunsanwo recalled how the naira moved from 71 kobo to a dollar in the 1960-1970 era, when the local currency even managed to gain almost 30 per cent on the dollar, to 54 kobo to a dollar before the 80s. The decline then started until it reached a situation regarded by analysts as a free fall.
Statistical evidence shows that in history, Nigerians have been doing more of believing than thinking, Ogunsanwo explained.
He pointed out that as in every economic situation, there would be winners and losers. He said the implication was that whoever stocked $2,000 dollars in 2010, with the present exchange rate, would have already become a millionaire in the local currency.
The down side, he noted, was that the turn of events at the forex market, which had continuously weakened the local currency, would be defeating the Federal Government’s economic policies.
For example, the plan to take 100 million Nigerians out of poverty in 10 years would become more of a mirage, with the dwindling fortunes of the local currency, because “the world benchmarks poverty levels against the dollar.”
For instance, where efforts of the Federal Government had taken some out of poverty with exchange rate at N350/$ some months ago, all those at the borderline would have slipped back below the poverty line with the current exchange rate of N575/$.
Worse still, other people who were above the poverty line then, would find themselves caught in the web with the more beating the local currency got from the dollar, which has given the forex the impetus to foster a vicious circle.
Sharing graphic details of the per decade growth/decrease of the naira/dollar, he averred that “you don’t have to be a mathematician to understand the direction of the naira,” in the forex market.
He opined that by mere mental observation, anyone could easily forecast where the naira would be by 2030, if the trend continued on existing basis.
In addition to wrong decisions and poor choices, which connived to bestow a ‘frightening balance of trade,’ on Nigeria, those who know maintain that other salient dynamics include divergent focus of fiscal and monetary policies, commoditisation of the currency, subtle legalisation of local billing in dollars or dolarisation of the domestic economy, supply of the dollars against demand, and the mode of meeting the local demand for forex.
Convenience and durability are other reasons proffered by financial experts for the high demand for the dollar in Nigeria.
An investment banker, who spoke to The Point under confidentiality, said, “In government and political circles, politicking and lobbying are also done with the dollar or other highly valued foreign currencies because it is easier to hold and move the huge sums that the ‘big ticket transactions entail.’ It helps to fuel the greed of the upper class.”
The Point gathered from several banking sources that the political class and the rich find it more convenient to stock and move their wealth in hard currencies because they are more convenient and durable.
“A glance at the political landscape in Nigeria should show people, executives and legislators who transact in the dollar, almost exclusively. Forex also helps solve their storage issues,” banking sources revealed.
The sources also highlighted that “with foreign currencies, the wealthy don’t need a vault to stash off huge sums in addition to ‘material strength’ for the various currencies, where the naira is also weaker. Many of them have woken up to the sad discovery that the naira they hid somewhere had ‘spoilt’ before they could utilise it.”
Informed minds insist that ‘fueling greed’ which has almost divided Nigerians into two tribes of basically “the haves and have-nots,” accounts for the divergence between fiscal and monetary policies, which is aiding the dollar against the naira.
Taming the monster
On ways to stablise the naira in the forex market, Ogunsanwo said it would take the monetary and fiscal policy departments of government working together.
Lending his voice to the issue, a former President, Institute of Chartered Accountants of Nigeria, Chidi Ajaegbu, said, “The real issue is with the supply of the dollar in the market. That’s what is impacting negatively on the rates.”
Ajaegbu, who spoke to The Point in a telephone interview agreed with Ogunsanwo on pitiable choices, particularly on consumption patterns and lifestyle.
He said, “The key thing is that we have to learn how to start buying less, importing less. We need to do those things that would reduce our demand for and dependence on the dollar.”
Specifically, the seasoned accountant noted that the fiscal policies should focus on certain areas of the economy like manufacturing, education, health, while people should reconsider foreign vacation.
“We need to fix the Ajaokuta Steel Company; we need to fix our hospitals so that we don’t keep traveling abroad for medical treatment; we need to fix our schools; we need to cut back on holidays; we need to start looking inwards,” he said.
The multidisciplinary financial expert maintained that unless these were done, lofty fiscal and monetary policies would meet with frustration in the marketplace, because demand for dollar would keep outstripping supply.
A Lagos based economist, Jumoke Ogunubi, opined that whatever the government does, both at fiscal and monetary policy levels might take time to yield fruits because the forex situation in Nigeria had almost become a vicious cycle.
Ogunubi, in a chat with The Point, reasoned that there was hardly any other country in the world where legal tenders were hawked around with the backing of fiscal and monetary policies.
He said, “In Nigeria, currencies of the world are bought and sold on the streets. But you must know that the Central Bank of Nigeria could only license Bureau De Change, because the Executive arm of government lent support. Without a fiscal policy, the apex bank couldn’t have done that. Again, you ponder how the BDCs get the supply of the foreign currencies they sell to their customers.
“There, you can see that one thing is leading to another. And it has become a means of livelihood for some people, which compounds the situation, because any attempt to dislodge them would be resisted in the strongest possible manner,” she said.
Ogunsanwo, however, maintained that neither the CBN nor the Federal Government could fix the naira alone. The salient issues raised by Ogunubi and Ajaegbo made it clear that the buck would not just stop at the table of the CBN and the Federal Government, ordinary Nigerians would have their say on the matter.
In addition to the BDCs, Ogunubi said, “There are numerous businesses in the domestic economy in segments like real estate, shopping and the hospitality industry that bill in dollars. Some Nigerians who consider themselves privileged also hold their savings in foreign currencies for obvious advantages against the naira.”
Wrong approach
Recall that Emefeile recently went frontal on the adverse forex situation, by calling out an online disclosure platform, Abokifx.com, which he claimed was responsible for the continuous beating the naira was getting in the forex arena.
At a recent media briefing, the CBN governor accused the disclosure platform of plotting the downfall of the naira in the forex through illegal publication of daily exchange rates, making it clear that hostilities had been declared between both parties.
Querying the sources of the data that Abokifx.com publishes, Emefiele asked, “In which other country will an unlincensed single person be the one to set the rate of exchange? How come he is the one setting exchange rate for our country?”
He raised many other questions to buttress his conviction that the disclosure site was against Nigeria, particularly because the website does not set or publish the rate for other countries’ legal tenders, including Ghana, South Africa, the UK and the US.
“Why target Nigeria and yet you are a Nigerian, … who lives in London and enjoys all the spoils in London at the expense of the blood of Nigerians,” he said.
Emefiele cited the statutory provision that saddled the CBN with the responsibility of determining the value of the naira.
While economists, investment bankers and financial experts who spoke to The Point agreed that the CBN had the responsibility to fix exchange rates for the local currency, they averred that the apex bank opened itself to attacks with the introduction of the dual exchange rate regime.
Ogunsanwo used a medical analogy to drive home The point that the matter required proper diagnoses for professional treatment.
“Headache could be traced to various reasons. There’s a need to diagnose the issue properly. We need to identify the cause(s),” he said.
From his perspective, “there’s one major cause, Nigeria’s balance of trade has been getting worse since 2018,” which can only continue to weigh down on the local currency.
Ajaegbu considers moving against the promoters of Abokifx.com an attempt at chasing the shadows.
“It’s a mere scratch. They (Abokifx.com) don’t have any role to play in determining the exchange rate,” he noted.
Those who should know, who spoke to The Point, share the view that mere dissemination of information on any subject could not easily be termed illegal and wondered how “disclosure” could amount to “determination of the exchange rate” itself.
Ajaegbu expressed surprise at the move and described it as ill-advised.
“I was very surprised with the move. For the CBN governor to come out so strongly the way he came out, I think that was very ill-advised and I absolutely think he can do better than that,” he added.
