989900:


Indeed, some financial interest groups have uncharitably engaged in an open smear campaign to rubbish CBN’s efforts to maintain sanity in the forex market; for example, “The Economist” brazenly questioned the competence of Godwin Enefiele as CBN Governor and in a venomously simplistic article titled “Nigeria’s Currency: Toothpick alert”, also ridiculed his attempt to control forex demand.
The overriding message, nonetheless, is loud and clear; speculative overseas investors and their media organs are in agreement with the movers and shakers in Nigeria’s banking industry to demand further reduction in the Naira’s exchange rate beyond N199=$1; additionally, these interest groups want CBN to also instigate higher rates of interest within the Nigerian economy, so as to promote the profitability of speculative foreign investors.
But the question is, what would happen to Nigeria’s economy and the social welfare of our people, if Emefiele and the CBN are intimidated and stampeded by the clarion call of these financial hawks, to further devalue the Naira and also increase domestic rates of interest, for government borrowings and real sector credit?
Indeed, Naira devaluation is probably the most potent weapon against the prosperity of Nigerians. Nigeria’s migration from a potential industrial power house with bustling social affluence, to a subdued and stumbling economy clearly began with the adoption of IMF’s Structural Adjustment Programme during Babangida’s regime: the chorus from International Agencies, at that time, was also that falling oil prices with an unserviced debt burden and the consequent restriction of trade credit to Nigeria, were the products of an allegedly overvalued Naira exchange rate.

[b]Ultimately, the overwhelming pressure from International Finance Agencies, with the governments’ craving for international support for an illegal military junta, precipitated serial Naira devaluations from less than N2 to over N22=$1 by 1993. This rash decapitation of the naira exchange rate pauperized Nigerians, including University professors and technocrats and tragically triggered the brain drain to more stable economies in Europe and America; sadly this disenabling phenomenon has gathered speed and persists till date, as beneficiaries of our individual and collective sacrifices still abandon serving their country in preference for dollar pay packets abroad.

Indeed, wages soon became decimated by unyielding devaluation, such that it became necessary for most Nigerians, particularly civil servants to make awkward adjustments and engage in ‘Extra-curricular’ activities to supplement their paltry incomes; although the impact of Naira devaluation may not have been the origin of corruption in Nigeria, it certainly contributed to its spread and public apathy to the disease as more Nigerians became beneficiaries of the wages of corruption.[/b]

Clearly, Babangida’s decision to drastically devalue the Naira did not recognize its impact on fuel price; indeed, the notion of fuel subsidy apparently became inevitable with Naira devaluation. Regrettably, successive administrations have remained in denial of this relationship and the most recent devaluations from N155 to N199=$1 within 4 months also triggered another 20% rise in fuel prices despite the irony of prevailing lower crude oil prices.
Consequently, additional Naira devaluation above 20% as demanded by overseas ‘investors’ would only stoke fuel prices and make subsidy removal a major challenge for Buhari’s administration; ultimately, fuel subsidy will exceed the alleged burden of about N1tn annually and account for over 20% of expenditure, if Federal budgets remain below N5tn.

Furthermore, an additional 20% devaluation, will also reduce minimum monthly wage to about $75, down from almost $120 only 5 years ago; indeed, with inflation consistently nearer 10%, the current minimum wage undeniably buys much less than was earlier possible, with a collateral reduction in consumer demand.

http://www.vanguardngr.com/2015/08/the-poison-in-further-devaluation/

courage89:


I appreciate this piece. Sometimes I am forced to conclude that Africans (policy makers) are cursed based on some of the decisions we make.

How can Nigerian CEO's be in support of devaluation of Naira at the expense of their own economy, and at the expense of their own global valuation. While I understand that they make easy money from short term foreign exchange arbitrage and interest rate mix-match, but this is at the expense of their growth opportunities, valuation and market stability.

Devaluation of one currency without proper economic structure to stimulate exports, will only lead to a poorer nation. Empirical evidence shows that our economic problems started and has been compounding based on our decision to accept the tenets of Structural Adjustment programmes (SAP); devaluation of Naira, removal of subsidy, increase interest rates and others. We've experienced more job losses, brain drains and other progressive benefits due to this single decision. Why toil this path again.

I don't support devaluation of Naira in any form. I believe devaluing Naira will further deteriorate our economic conditions and global competitiveness. It means we will have to pay more for imported raw materials and final products, more for education abroad, more for health care abroad, more for tourism abroad, more for international government and corporate debts. This also means reduced GDP, reduced per capital income leading to lower global purchasing capability.

We need to change this argument from current speculative agenda, to an objective agenda using real data to justify economic benefits and consequences of devaluation/ revaluation of Naira.

989900:



Hell, we don't even have stable power supply, access to loans, infrastructure, anything resembling an enabling environment -- we can't even refine our own fuel -- we spend trillions of Naira importing refined products and we think devaluing like those countries will work for Nigeria?[/b]

Hakagure:
Emotional responses to a problem, we would be better served by understanding WHY we devalued in the late 80's , early 90's. I lived through the massive retrenchments and significant inflation, the 1-1-1 to 1-0-1, from Anchor to Planta to Margarine, from new cars to Tokunbo, form Mothercare to Chinese. They key question is why?

To think it was just due to Babangida seeking approval is flawed, he followed a military regime, nobody was sanctioning us for being a military regime.

We did not have the forex to keep defending the naira , esp at $3 a barrell (the last major crash in oil prices before this time).

989900:


Well said

Devaluation of a nation's currency especially in our specific case is, DIRECT IMPOVERISHING OF THE PEOPLE AND NATION.

We went from buying 'brand new chasis' to buying scrap 20 year old cars, we went from buying bags of rice, beans, garri, to buying kongos (if you are lucky), some can barely afford cups/tins! We went from '1-1-1' (3 square meals) to a barely manageable '1-0-1'.

We went from buying cartons of sugar, detergents, to 'didi' the rationed ones in 'nylon'.

4Play:
If you think of it, high exchange rates facilitate importation. It's cheaper to import at 199 Naira to the dollar than at 220 Naira to the dollar. Therefore, an argument to maintain a higher exchange rate is functionally an argument to make it easier to buy foreign goods and services.

modath:


To buttress your point since it looks like we grew up in the same generation....

I do remember how people were checking out back then that it prompted veno Marioghae to write a song encouraging "Andrew" not to check out...

I have 2 theories in my head that I know is more of conspiracy theory but could never shake off...

1. The west needs us to keep them afloat.

2. The west needs cheap labour..

For theory number 1, I think back to the days of the textile mills in Iyana Isolo off oshodi/isolo expressway & how cool we were with their produces & the number of people that these textile mills employed..

All of them have been turned to warehouses & we have resorted to picking up rags in Primark , matalan,walmart & co, which inversely increases the prosperity of the west.

All we do do is consume because the west sponsored military juntas who were either not educated enough to see into the future or were enamoured by their position & didn't think of legacy..

2. As the prosperity of the west is increasing, the pin pointed another problem they were going to encountered in the future.. Unskilled labour to do menial jobs & s since their economy won't be able to support paying a Dr same as a cleaner.. They started thinking..

Where will they find this cheap labour

Third world countries of course & to achieve that, their countries have to be hellholes where life will be so unbearable that "checking out" & taking up these demeaning jobs will be like second heaven...

Wish I had the time to type more but I will only leave this salvo...

The day the west get really serious about clamping down on "illegal immigration", they should go pick them up from the morgues, butchery,bakery, construction sites, garbage disposal sites,supermarket stacking aisles, security guards cubicles & cleaning outfits..

Until then, they should stop media wailings..

989900:



No doubt part of the problem/plot.
And you're not far fron the truth, even though I'm not fond of blaiming others for my woes.

OTOH, forget the west for a second, how would countries like U.A.E., Qatar, Saudi, and e.t.c. have built monstrous cities without 'third worlders' especially cheap labour from India, Sri Lanka, Nepal, Bangladesh to mention a few.

Prosperous economies/cities have always needed 'slaves'. Even in ancient Africa.

baralatie:


[s]Now you are coming round small,small.
as long as PMB is doing "nothing" about the economic situatiin but chasing around the globe with no economic team to solve Nigeria peculiar situation. it will repeat that " unnecessary" devaluation becoming necessary![/s]

Hakagure:
Emotional responses to a problem, we would be better served by understanding WHY we devalued in the late 80's , early 90's. I lived through the massive retrenchments and significant inflation, the 1-1-1 to 1-0-1, from Anchor to Planta to Margarine, from new cars to Tokunbo, form Mothercare to Chinese. They key question is why?

To think it was just due to Babangida seeking approval is flawed, he followed a military regime, nobody was sanctioning us for being a military regime.

We did not have the forex to keep defending the naira , esp at $3 a barrell (the last major crash in oil prices before this time).

989900:


Nigeria's major problems have always been: lack of patriotism, ineptitude, greed, selfishness, and malfeasance.

It's less about oil prices.

BTW, we never sold oil at $3, the lowest was $9-$17 in '86 which would be roughly (averagely) $25 in today's money. And that was coming from a $19-$32/barrel (averagely $72/barrel today's money) band between '79-'85.

If we grew external reserves from less than $300m in '73 to $3.5b in 1980, how did we deplete that to $700-800m in '83 -- Shagari and his goons laid the template for Jonathan with their cluelessness, greed, ineptitude, unpatriotic deameanor, laced with perfidy and gross malfeasance.

Even at that, the exchange rate was relatively stable, compared to IBB's selling us to slavery by 'genocidal devaluation'.

I mean what was our forex demand then, with a population average of 75m between 1979-1986, working refineries (we didn't need dollars to import fuel), with relatively fairly stable power supply (we weren't importing generators like we do now . . . on my street then only 2 families had 'gen', we weren't importing alternative power solution gadgets), there were no internet orders, no China, we imported far less food then too.

And the above are the things that account for a large chunk of our forex demand.

So far, the only thing devaluation upon devaluation has done for us is, impoverish us!