Media reports, as at the time of writing this editorial, indicate that the nation’s currency, the Naira, exchanged at N573 to one United States of America dollar. For most Nigerians, that is disheartening in the sense that, for a country that is overwhelmingly import dependent, the effect on the economy and the overall wellbeing of the populace could be harrowing indeed. Our worry, however, is that this development is instigated.
Public opinion on why the Naira is lying so prostrate is varied and, in our view, mostly, overtly political. But in our considered opinion, what is going on in the black market controlled by the Bureaux de Change (BDCs) is a deliberate act of blackmail against the Central Bank of Nigeria (CBN’s) decision to discontinue their access to the official foreign exchange window. A confirmation of this conjecture on our part can be gleaned from the response of some of the black market traders who claimed that the slide in the value of the currency vis-à-vis other international currencies is as a result of the CBN’s ban on dollar sales to exchange bureaux. We urge the CBN not to succumb to this underhand deal.
It is the opinion of this newspaper that this attempt to influence policy negatively must be resisted this time round. Previous policy somersaults in this direction are responsible for the deplorable state of not just the value of the Naira but the economy as a whole. We recommend that, for once, let there be policy consistency regardless of the attendant pains and discomforts.
Having said this, it is imperative to recall that the trouble with the Naira started the day the government decided to give a stamp of approval to the black market foreign exchange window making them key players and decision makers in a matter that is so critical to the nation’s economic development. Before then, users of foreign exchange dealt directly with their banks. Today, that illegal forex outlet has become like an albatross for the simple reason that it is controlled by powerful forces who, acting from the background, influence public policy in a manner that benefits them and their interests alone. They use their powerful connections to source foreign exchange at official rates and round trip same through the black market at much higher rates, enriching themselves tremendously in the process. Even as the country bled.
The kind of hold this forex window had on the economy before the intervention of the Central Bank of Nigeria was similar to what was experienced during the days of import license which was controlled by this same powerful black market operators to the extent that manufacturers and genuine importers were compelled to patronise them if they wanted to stay in business. Before the CBN ban, most businesses sourced their forex through the black market, a practice that had serious implication for the economy leading to uncontrolled inflationary trend.
The downward spiral in the value of the Naira continued with the structural adjustment programme (SAP) of the mid 1980s which literally deregulated the economy and led to a massive devaluation of the Naira. The introduction of the Second Tier Foreign Exchange Market (SFEM) did not help matters, not with the crash in oil price in the international market and its negative impact on government revenues within the same period. The consequent heavy borrowing due to a depleting foreign reserve to finance budget deficits, did not help to shore up a currency which value was depreciating, perceptibly, rapidly.
It is pertinent to emphasise that a country with a low productive base, a critical economic factor, can only have a currency that flips and flops. At a certain period in the nation’s economic life, most factories ran three shifts and operated at full installed capacity which means job for the youths. The agricultural sector, for instance, that supplied raw materials to industries was booming. Power was comparatively efficient. Invariably, the currency was stable and only the essentials to the economy were imported. Today, the nation imports toothpicks, biscuits, apples and even toilet rolls. Politicians and other high net worth individuals store their wealth in forex without minding the effect on the Naira or, for that matter, the economy and still wonders why the value of the currency is low. Until very recently, food imports alone were consuming a substantial percentage of the nation’s foreign exchange earnings. Almost all the industrial inputs are imported. It was for this reason that the CBN embarked on a policy of backward integration including supporting other critical production sectors like power just to conserve foreign exchange.
We are, in this regard, compelled to posit that the ban on the BDCs access to official foreign exchange window must be seen from the perspective of making forex available for important economic and productive purposes. We, therefore, urge the CBN to ignore the blackmail of the BDCs and their sponsors.