28th March, 2012
The governor of Central Bank of Nigeria, CBN, Mr Lamido Sanusi Lamido, should consider this, “No nation leaves its currency to market forces and survives”, the former prime minister of UK said so in 1986, two weeks before the devaluation of the naira. Since then, CBN has not found a clue and solution to the self-imposed devaluation of Nigerian currency.
This is simply because there is no economic basis to devaluate the naira, a local currency, which is not internationally used as a medium of exchange in the first instance. In the advanced economies of the world, where the issue of devaluation or revaluation of their currencies is relevant, there must have been certain economic indices, pointing to the need to devaluate or revaluate their currencies. With such economic parameters, they are in the best position to determine or predict when their economies would bounce back to normalcy. That is why in such a situation, they never allow the market forces to determine the value of their currencies, because essential economic parameters are there as indicators to bring sanity to the economy, whereas in Nigeria, the speculative belief that naira was a strong currency as alleged by IMF, led to its devaluation by the CBN in 1986. However, the CBN failed to ask questions from the IMF on how to devalue a local currency which is not internationally recognized, and the process to use in arriving at an acceptable devaluation.
Of all the countries chosen to experiment the Breton commission’s recommendation to devaluate their currencies, only Ghana that I know came out successfully to revaluate her Cedi in 2007, while others, like Nigeria, are still wallowing in abject poverty, up till today. And the main reason for the failure is that the experiment was bound to result in economic woes for the affected countries because the local currencies are deficient of any known economic indicators to devaluate or revaluate them. That is why devaluation of the naira has become intractable for the past 26 years.
Before devaluation in 1986, N1 exchanged for $1, as at 31/01/2012, it was N161 to $1. The multiplier effects of this consistent devaluation of the naira are:
1. Escalating prices of essential goods in the market, and increase in transportation fares;
2. An army of unemployed youths from universities and other tertiary institutions;
3. Breeding of notorious armed robbers who have formed gangs, throughout the length and breadth of the nation, and professional assassins, who terminate the lives of others they cannot create;
4. Emergence of 419ners everywhere, wreaking havoc on unsuspecting victims; and
5. Corruption that has metamorphosed into an octopus with tentacles, gripping tightly all facets of government and private businesses. Also the mother of all corrupting influences was exposed recently through the fuel subsidy removal on January 1, 2012, when the cabal of petroleum importers, NNPC, and others, were found to be milking the nation dry. They make regular daily supply of 25 million litres of fuel to the nation, while 34 million litres of fuel develop wings and fly away everyday. This exposition shows that the inability of the 4 refineries to work at full capacity was to enable this cabal of petroleum products importers to stay in the corrupt business, as long as possible. We presume that the government has now learnt the hard fact, that there is nothing like fuel subsidy, if we were to consider the cost of refining 1 litre of premium gas at less than N2, apart from the deliberate manipulated plan to make sure that the 4 refineries did not undergo better turn around maintenance (TAM) to produce at full capacity, so that the cabal would continue to exploit the nation. However, we thank God that the EFCC has been mandated to probe all the culprits involved in this economic sabotage against Nigerians and to recover from them all the monies they have embezzled.
Therefore, as long as devaluation of the naira was not based on any known economic indices in 1986, and was left to market forces to determine, the CBN had committed the greatest economic blunder against the nation. There is no amount of economic theories propounded that could save the naira from further nose-diving into ordinary paper, except CBN takes drastic measures to deliberately revaluate the naira. It should find out the exact value of naira to the dollar in 1986, which was N1 to $1. That is exactly what the value of naira should be today, period. Reverting N1 to $1 would help the economy of Nigeria to bounce back, like that of Ghana, inflation rate of about 15% at present, caused by the removal of fuel subsidy, will fall to about 5%. Whatever amount of the naira you have in your pocket would become valuable and enhance your purchasing power. Anything less than this would lead to economic hara-kiri for the nation. It is only those who have amassed wealth through the devaluation of naira that would die of shock.
Also, the CBN Governor should consider this: do you know that the twin World Trade Centre buildings in New York were made to join together by the suggestion of a layman. All the best structural engineers met in New York to consider how to join together, the 2 buildings structurally without success, until a layman, an administrator, showed them the best way to do so. Therefore you have to do something about this submission to save the country from further economic problems. It is rather unfortunate that for the past 26 years that the naira was devalued, the CBN could not find any meaningful solution to the financial problem plaguing our nation.
Finally, think of this also: The inflationary rate in USA was reduced from 7% to 3% by the government in January 2012.
In addition, President Barack Obama created 238,000 jobs in the first month of this year. Progressively, and before November 2012.(the month of election), he must have created more than 2.3 million jobs. These economic achievements would contribute immensely to his success in the election. Whereas in Nigeria, the only New Year gift from our president was removal of fuel subsidy and increase in the inflation rate up to 15%.
Even the SURE project of President Goodluck Jonathan, which was announced immediately the partial fuel subsidy was removed, to serve as palliative, would no more be pursued totally, because the full removal of fuel subsidy was not achieved. Hence, all the mouth-watering promises and hope of the president to improve the lives of Nigerians, provide 6,000 mega watts of electricity this year, construct good roads, and repair bad ones, provide jobs for the unemployed, improvement in education and health funding, improvement in food production, and provision of better security, would virtually become a nullity.
One thing is clear, the PDP government of President Goodluck, has no plan or manifestoes to rule the country. Most of what the government has embarked upon as plan, is mere afterthought. That is not how to rule a nation of about 155 million people. At the end of the year 2012, there would be nothing substantially to show for the trillions of naira budgeted. The government was supposed to realize N1.89 billion everyday, from the day of announcement of fuel subsidy removal. We expect what the president is trying to insinuate is that the paltry N1.89 billion revenue, received from subsidy everyday would not be enough to start providing most of the necessary social services to the nation. What a contrast similitude!!
•Lasisi wrote from Lagos.