Mr President, the Naira is already devalued!
President Muhammadu Buhari was reported on Friday last week as saying he was yet to be convinced that the vast majority of ordinary Nigerians would derive any tangible benefit from devaluation of the Naira. The president said this at a meeting with members of the Council of Retired Federal Permanent Secretaries in Abuja. He was quoted as saying he still held the conviction, which motivated his principled resistance to devaluation in his first tenure as head of state. Hear him:
“When I was military head of state, the IMF and the World Bank wanted us devalue the naira and remove petrol subsidy but I stood my grounds for the good of Nigeria. The naira remained strong against the dollar and other foreign currencies until I was removed from office in August, 1985 and it was devalued… But how many factories were built and how many jobs were created by the devaluation? That is why I’m still asking to be convinced today on the benefits of devaluation.”
Although the President does not believe devaluation is good for Nigeria, sadly, devaluation has already happened and the entire economy now runs on the rate of the dollar at the black market. Devaluing the Naira may not lead to the building of more factories but the government’s refusal to float the Nigeria is causing real problems for the economy and the country is haemorrhaging jobs in their millions. Companies and factories have been scaling down production or shutting down altogether due to difficulty in accessing foreign exchange to import essential parts and raw materials.
Besides, virtually all prices of goods and services are now indexed against the black market rate of the dollar – at N320 to a dollar. If that is not effective devaluation of the Naira, we wonder what is? The few beneficiaries of the official exchange rate are the rich and middle class Nigerians who have access to BTA and PTA; who send their children abroad for education and who travel abroad for vacation and for medical purposes; the smart politicians, businesses and well-connected individuals who game the system by obtaining dollars at the official rate and selling same at the black market and making huge profits at little or no cost.
The argument that the Central Bank is supplying cheap dollars at official rates to manufacturers is actually ridiculous and not entirely true? Most genuine manufacturers do not have access to the CBN’s scarce dollars. They get their dollars from the black market. Rather, CBN’s dollars find their ways easily into the hands of fake manufacturers and businessmen who are adept at gaming the system, opening up fake Letters of Credits, obtaining the dollar at the official rate and selling them off at the black market. It is no wonder that the dollar has become the most profitable commodity for those lucky enough or connected to get it at the official rate.
Even for genuine manufacturers who get the dollar at the official rate, they usually index their prices against the black market price thus making nonsense of government’s attempts to shield consumers from the effects of deregulation? That largely explains why the economy runs on the black market exchange rate. So, whatever way it goes, the manufacturers and businesses gain and the country and majority poor Nigerians – whom the President intends to protect – actually lose and bear the brunt.
Meanwhile, genuine investors are being put off by the unpredictable environment where the government rigidly continues to fix the price for a currency that has already devalued itself and is selling even above its real value at the parallel market. They would rather wait until the situation is sorted out before they can bring in their money.
By maintaining a dual exchange rate, the government is creating a huge industry of corruption through the arbitrage opportunities it provides, endangering the economy, encouraging capital flight and divestments, and preventing investors from coming into the country.
Obviously, the government’s choices and actions have led to run-away inflation and is causing real and untold hardship to the poor people he promised to protect. Consequently, prices of goods and services, whether imported or locally produced, have hit the rooftop? For instance, a 25 litre King’s vegetable oil that sold for N6100 last year now sells for N9500. A 50 kg bag of rice that costs about N10, 000 last year now costs N14, 000. Also, a basket of fresh tomatoes that previously costs N5,000 now costs N17, 000.
Mr President’s current stance mirrors his position in 1984/85 where similar rigid economic policies led to economic immobilism, suffering and scarcity of even essential commodities such as rice, bread, sugar, and milk and Nigerians had to queue for days to purchase little quantity of commodities at exorbitant prices.
It is not the duty of Nigerians to convince the President. It is the duty of the president to manage the economy in such a way as to engender growth and development. That is not happening now. Perhaps the President needs to be rescued from his ideological rigidity.