NAIRA DEVALUATION IS NOT THE SOLUTION

"Nigeria, our dear country, is without doubt in a very precarious economic situation. The fundamentals are crying doom. The price of oil, the nation’s major foreign exchange earner has dropped from about US$110 to abysmally low level of about US$57 per barrel. This is a massive drop in revenue and inflow into the nation’s foreign reserve. Foreign exchange rate pressure is at all time high, stock market is bearish, liquidity in the money market has become a palpitating issue among operators, human capital unemployment is high and still climbing, infrastructure is in shambles, insecurity is sliceable, the public sector is aching under heavy salary arrears, and youth have become restive. Gloom is written on the faces of private sector entrepreneurs due to low business activities and they are responding by downsizing. Definitely, this time in Nigeria is about the worst in the economic history of the nation since independence.
As a solution to the problem, some eminent bankers and economists have suggested that the Naira should be devalued further from its present exchange rate of US$1.0000 to N197.0000. Truly, if a country is faced with the kind of situation painted above, the first solution that economists suggest is the devaluation of the nation’s currency. Currency devaluation, if it works well, will make import dearer and export cheaper.
A currency’s international value, stated as exchange rate, is a measure of one country’s economic value in relation to another. Movement of foreign exchange rate is an indicator of the change in the economic worth of one country’s nationals relative to another. For example if US$1.0000 equals N2.0000, it means that America’s economy is stronger than Nigeria’s economy. But if the exchange rate moves from US$1.0000 to N2.0000 to become US$1.0000 to N4.0000, it means that Nigeria’s economy relative to that of America has worsened further; in cash terms, Nigerians’ economic worth has become half of what it was before the currency devaluation. Devaluation is an erosion of the economic worth and standing of a country’s citizens relative to citizens of other nations of the world. In a nutshell, devaluation of the Naira is a reduction in the economic worth of Nigerians and whoever holds assets in Naira. This explains why a currency with unstable exchange value is a poor store of value. What this suggests is that a country’s currency should not be devalued unless there is strong ground for it.
It was in 1986 that Nigeria, under General Ibrahim Babangida’s government, entered the cycle of currency devaluation; since then devaluation has become a serious economic issue in Nigeria. Before then, one dollar was exchanging for seventy-five kobo. The exchange rate has moved to US$1.0000 to N197.0000 today; yet the story and song are still the same. Prior to the 1986 murder of the Naira, Nigerians were using only brand new imported items. Today, Nigerians are using “Tokunbo” items of various grades (pants, bra, shirts, trousers, shoes, electronics and automobiles etc).
The question is if the Naira is devalued further today, will the economy bounce back? To what level should the Naira be devalued for us to have the economic growth we desire? In April 2015 just after the elections, the rate went to as low as US$1.0000 to N225.0000; the economy did not perform better than now. What we have failed to realize is that the problem with Nigeria’s economy is much more fundamental and deep-rooted than what currency devaluation can solve. If we devalue the Naira today to US$1.0000 to N500.0000, we will still be singing the same song in another four years.
What problem does Nigeria have that is making her economy to run berserk? What exactly is keeping Nigeria in the vicious cycle of devaluation? And how can we come out of the devastating cycle?
The problem is that Nigeria’s colonial master and their allied developed countries are in stiff and"

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unhealthy competition against Nigeria. We are in a cold economic war with world economic powers; no matter how much they pretend to be helping us, a fundamental self-interest they have and protect is to keep us in perpetual servitude and position of exploitation.
It is a war that started immediately after the independence and will continue for a long time. Nigeria is a vast country with high human population (about 170million people); that makes her a big market for the products made by the developed countries. They will want us to remain a consumer nation in order to keep their economies running and growing. No matter how low we devalue our Naira, the developed countries will introduce measures to neutralize its impact to ensure that they keep getting our raw materials cheap and giving their products to us at prices that our local industries cannot match. It is the only way by which they can protect their home economy and get their own citizens gainfully employed in decent jobs. One result is that our country will run into exchange rate induced inflation, Another fallout is that more Nigerians will flee to foreign countries to search for greener pastures and become second rate people, offering comparatively cheap labour and doing menial jobs to earn the almighty dollar.
Our leaders have been fighting an economic war they did not understand. They did not know the real enemies; they did not know the enormity of the war; they did not know the strategy of the enemy; and they were at a loss as to the weapons to deploy to defend the land and keep the enemy at bay. To worsen the matter, our leaders have been suffering from economic mirage and consequently applying the economic theories that the enemy taught them to solve the superficial problems they identified; and the result is that of moving from frying pan to fire. The enemy we have in the developed countries that are well aligned to keep our economy in comatose perpetually is worse than the enemy we have in Boko Haram.
The Buhari-led All Progressives Congress government is one poised for change; so far the President has shown his determination not to disappoint Nigerians. Now that the President has put his cabinet in place with eminently qualified and competent Nigerians at the saddle in the various ministries, they must get serious with the business of revamping the economy. Policies that have reduced Nigerians to paupers and rag wearers must be done away with forthwith. Instead of devaluation, the new cabinet should strategize and work to make the Naira get stronger progressively against foreign currencies. They should create conducive economic, political and financial environment for investments to thrive for both Nigerians and foreigners.
We have our rich mineral resources, our vast land mass, our ocean terrain and water life, our large population of agile and well-educated youths and wise and experienced elders to change the course of Nigeria’s fortune. If we pray hard and work smart, we can make the economy of Nigeria better than that of China in ten years. We can do it. Each region of the country should leverage on its area of comparative advantage and government should support the regions along that line. Let us engage our people in agriculture, mining, technology, furniture, education, commerce, etc. Emergency should be declared in the economy such that we should be made to buy and consume locally made goods and services. Spending money on ceremonies should be taxed heavily. Foreign trips should be allowed only if unavoidable.
Above all, government must fight corruption to a standstill. Looting of our commonwealth should be punished severely. We can make the corruption war less hostile by motivating looters to surrender willingly part of what they looted; a 70/30 ratio policy might not be too bad.
Above all, we need unity, focus, determination, priority re-ordering, and patience."

by Leke Adebanjo
Culled from Tell Magazine (November 2015)

My brother!
God bless you for this!


lalasticlala abeg front page biko!