We note with serious concern the call by some bankers led by the Managing Director of First Bank of Nigeria, Mr. Bisi Onasanya to President Muhammadu Buhari to direct the Central Bank of Nigeria, CBN, to further devalue our currency the Naira which presently exchanges N225 to US$1.
The call is not only preposterous but outlandish and smacks of gross insensitivity to the plight of millions of Nigerians who find it difficult to eke out two meals a day.
In this regard, we wholeheartedly align ourselves with the position of the Joe Ajaero-led Nigeria Labour Congress, NLC which has equally voiced out its opposition to the move. Just like the union argued, Naira devaluation will amount to policy dictatorship and ambush on the part of Mr. President against those that voted for him which had nothing to do with the ruling party’s electoral promises which Nigerians overwhelmingly voted for.
We caution Buhari to be wary of policy dictatorship of some vested interests aimed at undermining his electoral promises of ending mass poverty and transforming the country to prosperity. He must resist those pushing for further devaluation of the naira.
Nigeria’s economy is dependent on crude oil and this is sensitive to oil price shocks, to the extent that any development in the domestic and international oil markets has a ripple effect on most macro-economic indicators. In view of the aforementioned, the Naira has come under immense pressure which has been largely sustained since August 2014 with the apex bank implementing strategies in a bid to maintain exchange rate stability.
We note the various policy measures that have been introduced by the CBN in recent months to ease the significant pressure on the naira with the movement of the midpoint of the official window of the foreign exchange market to N168/$1 in November 2014 and the closure of the RDAS/WDAS foreign exchange window in February 2015 being noteworthy. The closure of the RDAS/WDAS in our view offered some respite to the financial markets and significantly slowed down the rate of depletion of reserves – significantly lower than the rate of depletion of 13.12% seen between January and March 2015. We also observed a slight accretion to the external reserves in May 2015 as it rose on a month-on-month basis for the first time in nine months.
At the same time, we should note lose sight of the fact that Nigeria more than any other nation, currently suffers huge capital inadequacy, with the nation’s foreign-currency reserves sharply fallen by some 27 percent to $29 billion since the end of last September. CBN new measures aimed at capital application and capital control in line with its statutory objective will definitely enhance domestic production in place of unhelpful luxury imports. It will also save the nation the current capital flight averaging some N1.3 trillion ($6.5 billion) a year, (almost half of national budget) on avoidable unnecessary job-killing food imports.
Central banks worldwide ensure public control of capital for development without which capital on the loose can finance underdevelopment, cocaine growing as well as finance terrorism as America painfully came to realize in the wake of September 2011 ugly incident.
Hence, what Nigerians look forward to are urgent fixing of the existing refineries; passage of the Petroleum Industry Bill, PIB; re-organisation and repositioning of the Nigerian National Petroleum Corporation, NNPC; reinvention of the downstream infrastructure of fuel production and distribution as well as an end to crude oil theft and decent jobs teeming unemployed youths not Naira devaluation with its multiplier effects of inflation, job cuts, high food and transportation costs.
In this regard therefore, policy effectiveness in our view will also be largely hinged on the significant increase in domestic production to meet teeming demand of locally made goods to prevent demand-pull inflation.