Open Letter to President Buhari/Osinbajo
Re: Devaluation of the Naira
By Dr ( Senator ) Bode Olowoporoku
The controversy as to whether to devalue the naira or not has taken the centre stage in the national discourse. One can pardon illiterates in economics especially primitive accumulators who are shouting for further devaluation of the naira. But when some professors of Economics and Ex CBN Governor and IMF have joined the chorus to continue to devalue the naira, then, something serious is amiss. The single reason they all gave is because the rate of Naira in the paralleled market has worsened. In the first place, Nigerians must know that the Dollar is not a legal tender in Nigeria. Only the Naira is our legal tender which facilitates the exchange of goods and services among Nigerian citizenry. I beat my chest that my former students who are now professors of Economics who went through my courses on theories and strategies of Economic Development at Ife can never make mistake of joining the neoclassical scholars on this fundamental issue which is central to the economic developments of Nigeria.
The history of nations that have developed shows that nations during their development process concentrated on the internal organization of productive sector and not the exchange of their national currencies against any foreign currencies. It was only during the gold standard that every country was legally compelled to relate their currencies to the value of gold which was like a legal tender in all countries. But since it was discovered that the expansion of different economies was put in straitjacket by gold standard and so it was abandoned. Every country was allowed to have its national legal tender and therefore no compulsion or pressure to fix any national currency to any external currency.
Thus when Japan embarked on its historic strategic economic development, the Japanese Yen was about 1,000 to the Dollar. Today it is 112.86 to the dollar. It is the growing strength of the Japanese economy that has moved its currency to its present exchange Rate Level. Japan was not under pressure to devalue its currency, it ignored all external rates of the Yen and concentrated on increasing its productivity and productive capacity. China also ignored any exchange rate, devised visible and invisible walls round its economy in complete autarky. The Yuan that was unknown some years ago is now gradually becoming international currency. In fact, most big countries that have attained meaningful economic development used autarky or semi-closed economy as strategic device during their infant years on the race to accomplish fundamental economic development. What is important is development.
Countries which have developed models and strategies of economic Development have no time to be panicking about the exchange rate of their national currency to any other foreign currency. The concentration is on expanding the productivity and productive capacity of their country. It is the primitive accumulators coupled with neoclassical esoteric scholars that want to derail President Buhari from concentrating on how to get Nigeria started on the path to fast-track the development of Nigeria. Therefore, President Buhari is right for insisting that the Naira will not be officially devalued any further. It has been devalued twice or thrice from N150 to the dollar to its present official rate of N196 to the dollar, Despite, the rate at the parallel or black market widens. It is above N300 to the dollar now. If the Government should start running after closing the gap between parallel market, it will develop into run away rate and this will be disaster because the naira will soon become object of rejection. It is the enemies of government who want to drive the government into no end devaluation of disaster. I wish Buhari were a military Head of State so as to have power to ban the parallel market and let us see those who are used to Dollar as their own Legal tender who will run away from this country. It was a shame that Jonathan as President of Nigeria resorted to the use of dollar to the extent that Dollar became the legal tender in the Villa which made dollar to become the legal tender in the strategic institutions of Nigeria. In fact the State Governors then opted that its monthly allocation should be in dollar, what a disaster that the regime inflicted on Nigeria. We are now reaping the agonizing fruits of the locust years of misrule of Nigeria. Those who are crying hoarse are thiefs, money launderers and other primitive accumulators who trade only in money and not in goods and factors of production.
The most critical importance of foreign exchange is the effect on the external balance of trade/balance of payment. The bigger the deficit in balance of trade the greater the problem of the Country. Therefore the important countries of the World used all methods at their disposal to restrict imports and encourage exports so as to ensure favourable balance of trade which would also enhance productivity and employments. Some closed their economy completely in what is called autarky. Japan, China and Britain etc used autarky to curb and developed exports behind protective walls.
If we devalue the Naira, the benefit should be to reduce import and increase export. But because we are a consuming nation there is nothing to export, therefore there is no gain to the Nigeria economy from such devaluation venture. Worse is that the appetite of Nigerians for foreign goods is inelastic which means that when devaluation makes foreign goods more expensive, this does not reduce the Nigerians demands for the goods. Therefore why should an enlightened Nigerian be excited that Nigeria will bleed on all fronts if we continue to devalue.
The reason some people advance is because of round tripping by banks. It is a pity that President Buhari has not yet put radical economic revolutionary policies in place. Why must the CBN continue to distribute US Dollars monthly or weekly? Is that how Malaysia, Brazil, Ghana, South Africa, Hong Kong, Singapore, Turkey etc allocate Dollars weekly or monthly? It is this allocation that breads corruption which destroys and distort the productive apparatus of Nigeria economy. As part of President Buhari economic policy, let a Commission be put in place with a mandate to diversify, increase the industrial capacity of Nigeria. A list of industries that can directly manifest the mission statement of the Commission be put in place. The dollar allocation should go to such industries and under the watchful eyes of the Security Agencies. Part of the dollar earned from oil should be used to boost our foreign reserve. Any other establishment that cannot operate within the confine of Nigeria development goals and targets can ship out. Those industries that have large employment absorptive capacity, and or export orientation must be adequately catered for in the allocation of the dollar whose value to naira will be determined to deliver the political economy of Nigeria from the shackles of underdevelopment.
The only vacuum in President Buhari policy is that he has not unfolded meaningful economic policy vision that can refocus the psyche of Nigerians to an inevitable future that is full of reaping the benefits of the sacrifice being made now. Buhari cannot rule in a visionless vacuum. He needs economic vision which can get the citizenry to fast-track the development of Nigeria. National Conference cannot fix this for President Buhari. Economic Development is not costless, it has pains incorporated. But if the Government unfolds Economic Policy that can make Nigeria know that soon, it will be comfort and happiness, Nigerians are willing to sacrifice. Only the elitist primitive accumulators who have stolen Nigerian wealth in a big way can almost go to war because Nigerians are being asked to sacrifice. They are the enemies who inflict injuries on the common man.
If President Buhari must be the Messiah as countries which have developed have their messiahs at critical period of their development,
therefore President Buhari must engage knowledgeable Nigerians to draw up economic development programme. Budget is just a fiscal layout of revenue and expenditure of government. It is at best an exercise in infrastructural guide of the nation. What we are talking in Economic Development is an integrated holistic programme of total mobilization of the citizenry and remodeling their psyche to diversify and increase the production and productivity of the entire citizenry. To achieve this, all the Nigerian economy must be organized on Systemic Models, sector by sector with different academies that will outreach all programmes into the entire citizenry. Economic Development is not an esoteric theme of the neoclassical theory rather it is an empirical policy drawing and blending from similar historic and recent successful experiments.
President Buhari must sit down and act fast so that detractors and scholars of neoclassical theory (which IMF represents) do not overwhelm him into permanent derailment. Because oil price dropped, therefore major source of dollar accumulation dropped and the value of naira to dollar inevitably dropped therefore some well placed Nigerians shout that there is economic crisis. But if there is shortage of water, cassava, yams, maize, there is no talk of economic crisis. The total foreign sector of Nigeria that must use Dollar as their Legal tender is not more than 15% (or less) of the Nigerian economy. It is in the interest of long run development of Nigeria to reduce the 15% for now until Nigerian Economy has grown the structures and capacity to export and compete in the World Market as Japan, China, India etc has done and as Britain did when it was trying to industrialize. It is not in the interest of Nigeria to leave gold standard and move to dollar standard.
Lastly, I want to feel that it is not because of dollar crisis that an Economic National Conference is being called. This cannot be the alternative solution. The only solution to grow the Nigerian economy and it is the duty of Government to put in place economic programmes that can expand the domestic economy of Nigeria. Experts in Economic Development must be called to bear the task.
By
Senator Dr. Bode Olowoporoku (Ph.D Econ, Manchester)
Former University of Ife Lecturer in Economic Development
Former Commissioner for Economic Planning and Statistics, Ondo State
Former Federal Minister of Science & Technology
Senator of the Federal Republic of Nigeria 2003 - 2007


CC; LALASITICAL

Let me read

This is educative! The value of the nation FOREX does not improve the economy, rather it is a robust economy meticulously built that grows the value of FOREX.

In nutshell, the development of any country is not tied to the exchange of their national currencies against any foreign currencies but a function of the organization of the internal productive sector by encouraging its local contents.

Way to go but we need a capital based budget with formidable economic masterplan then we can focus. Sadly that is not happening truth be told. The current budget is a national embarrassment

I'll read, let me comment first

front page

This is one of the most impressive and unbiased advice on the nation economy i have read in recent times.
The man's informed radical knowledge in developmental economy requires urgent attention from Mr President, not the sensational and mischievous claim of the likes of Ifeanyi Ubah, Ayodele Fayose and Co.

I like this part.

Because oil price dropped, therefore major source of dollar accumulation dropped and the value of naira to dollar inevitably dropped therefore some well placed Nigerians shout that there is economic crisis. But if there is shortage of water, cassava, yams, maize, there is no talk of economic crisis.

https://www.nairaland.com/2969088/why-support-buhari-naira-dollar#43445234

Cc: Mynd44