By Olufemi Adebiyi
Virtually every Nigerian is lamenting about something at the moment. The rich are crying because the noise of the poor is disturbing their sleep, while the opportunity to flaunt their wealth has never been riskier than it is now. Not only are they not sure of the backlash from the bad boys, there is also the fear of the government of President Muhammadu Buhari making a discrete check to confirm that the opulence is not the proceeds of privatisation of the commonwealth. The lament of the poor is not difficult to rationalise: The money in his pocket is becoming more and more like papers: he now carries money to the market with a wheelbarrow and returns with the goods procured in his pocket. Those who are in employment are not sure if they will still have their slot tomorrow, while those in the labour market have seen the unemployment queue getting longer with very little hope of getting to the “service point”.
Motorists now sit for longer periods in their cars, not because of longer journeys but in queues for what will make the engine roar again. The pedestrians are no better: they stay longer at bus stops for buses that may never appear, and when they do, more resources are needed to settle their fares with the bus operators. With the spate of very high temperature at these times, everyone has a lament: Whether you have a generator or not. In the last two weeks, public power supply has become the standby why private power generation has become the more regular source. Those with petrol generators cannot buy fuel in kegs or jerrycans, and those without generators empty their freezers in the dustbin for not correctly reading the times. The paradox list is endless.
Expectedly, this has generated many reactions, but only very few responses. I am sure we know the difference between the two. One of the noisiest and, I am quick to say, flimsiest “reactors” is a governor in one of the South-West states, who is quick at pointing at the speck in the eye of the Federal Government while leaving the log in his own eyes. He is supposed to be governing one of the states with the highest concentration of very knowledgeable people in the country. Unfortunately, he has become the best specimen of zeal, but not according to knowledge. It’s important to make this point here before the major theme of this essay is interpreted as an endorsement of his cries because the state he governs, which once had one of the largest “poultry farms” without the associated chicken droppings, is equally groaning under his leadership style.
I am concerned about the ongoing lament as we are not finding appropriate responses; and the major reason has to do with a huge gap in the economic policy of the Federal Government – the misaligned and the unstable exchange rate. An exchange rate is misaligned when the actual level is far from what purchase power parity suggests, and it is unstable when future rates cannot be predicted with some reasonable precision. As we speak, the naira exchange suffers from both misalignment and instability. It is an illusion for the Central Bank to assume that the exchange rate is stable just because it has pegged it at a clearly unrealistic level over the past few months. The mirror rates have shown unusual, albeit unprecedented fluctuations. Imaging an exchange rate of N320/$1 in one day changing to N250/$1 the next day? And then a premium of more than 60 per cent between the official and the parallel market rates!
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There is absolutely no justification for the current artificial exchange rate of N199/$1. None at all. Our foreign exchange inflows from export earnings have waned, our national productivity is at its lowest ebb. And no foreign investor brings his resources to an environment with misaligned and unstable exchange rates. Virtually every rational thinker knows that we need more foreign exchange inflows to shore up the naira value, but this government is not pursuing policies that will engender this. It is one thing to conserve what you have; it is another to increase the supply. I don’t know whether any of these characterise what the Federal Government is doing now. If you ask my view however, I will weigh in more for size increase than conservation. The argument is that an official devaluation will hurt the poor. But the poor is already hurt as everything he buys, including sachet water, tomato and pepper are now priced at the unofficial exchange rate. Meanwhile, all foreign portfolio investors have stayed off the stock market and virtually most of all the listed equities are grossly under-priced. Meanwhile, the stock exchange index remains a major barometer for measuring the health of an economy.
My major lament, as an economist, is the position of the Central Bank. The Bank is supposed to be the Federal Government’s primary advisor on this matter. Regrettably, the CBN appears to be supportive of the Federal Government’s wrong poise. Rather that advise the government on the inevitability of lowering the naira value at the official market, it has, in its last Monetary Policy Committee meeting adopted a tight monetary policy stance in defence of the naira, even at the expense of the real sector of the economy! Why is the bank taking this wrong stance? Is it that the CBN Governor wants to keep his job by singing the same tune with Mr. President, even when it makes no economic sense? The Food and Beverages wing of the Manufacturers Association of Nigeria has reportedly listed two million jobs to be scrapped because there is no foreign exchange to import essential raw materials. Most of them that are Nigerian outposts of multinationals are adopting the ‘siddon look’ approach as their parent firms are not sure of the direction of our economic policy. Those who would have brought in raw materials through intra-firm arrangements are not sure how to cost/value the items!
Mr. President, this economy is hurting. The fluid or nebulous foreign exchange policy is a contributory factor and should be covertly addressed. The artificially high value of the naira is a tax on exporters and a subsidy to importers, which the poor is not benefitting from. It is a contributory factor to the ongoing fuel scarcity, and it will be naïve of the Federal Government, through the Nigerian National Petroleum Corporation, to become the sole importer of petroleum products. This government might have a distaste for the unprecedented level of corruption that it has discovered, but it cannot eliminate it by replacing the market with government control. Even if we assume that President Buhari’s government is corruption-free (and this is doubtful as the government is not synonymous with an individual or a handful of people), it will be an exception rather than the rule. Governments all over the world are not known to do efficient businesses, and a wholesale resort to the public sector to do what the private sector is better equipped to do is a prescription for future crisis.
The government should come up with a clear exchange rate policy. Both the monetary and foreign exchange policies should aim, not only at curbing inflation, but also stimulating economic growth. And we do know that a little dose of inflation cannot be avoided when stimulating development. What we are experiencing now is not mere inflation but stagflation. Every rational thinker knows that the current policy of pegged exchange rate is not working; rather, it is hurting the economy badly.
Dr Adebiyi is the Managing Partner/ CEO R&S Consulting Ltd, Maryland, Lagos
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