By Adefemi Adegoke
Nigerians woke up recently to observe that the Naira, which had persistently experienced a slide downwards, was becoming punch drunk in the face of the onslaught of the Dollar and, indeed, other international currencies including the once derided CFA used by our Francophone neighbours . It was exceedingly disturbing that the national currency could go as low as 710 to the Dollar though it is beginning to regain its weight in value. But that momentary drastic loss of value affected almost every other national index of economic activity including energy prices, cost of food items and transportation especially the aviation sector. Within that period, economic analysts including the type that participated in the Babangida era International Monetary Fund (IMF) debate of the 1980s that midwifed the structural Adjustment Programme (SAP), in their views, mourned the demise of the nation’s currency and its implication for the welfare of Nigerians. A lot of arguments were put forward, some informed, others down right pedestrian as to what was the main issues that are impinging on the exchange rate. It was a period of blame game that added very little insight into what was wrong and what could possibly be done to restore the lost glory of the currency that once exchanged one on one to the Pound and one to 85 cents.
In the ensuing hoopla, all eyes were on the Central Bank of Nigeria (CBN) as the institution that makes policies that regulate and control the operations of the foreign exchange market and ensure financial system stability. There was an attempt to ignore the fact that foreign currencies of whatever denomination are earned through productive endeavours. This part of the argument makes it pertinent to put the whole discourse on the nation’s foreign exchange policy vis- a-vis the value of the Naira in its proper perspective. The inexorable fact is that not much of productive capacity is going on to the extent of being a major foreign exchange earner. Nigeria is still, to a large extent, a mono-cultural economy heavily dependent on the proceeds from oil and gas. With the criminals invading the oil sector and stealing what is produced to an estimated level of 80 per cent, and even with the high price per barrel of the commodity in the international market, that sector, as a reliable source of foreign exchange, is becoming suspect. An oil major, Shell Petroleum, said that much recently. Based on this understanding, I am compelled to recall that the present management of the apex bank’s decision when it came into office and initiated a policy of economic diversification intended to broaden and expand the nation’s foreign exchange earnings. The implementation of the policy led to the reactivation of the agricultural sector as an indispensable part of the country’s economic production activity. The Anchor Borrowers Programme (ABP) and the policy of agro-business resuscitated that once dormant sector. The policy, also, was extended to 43 items which were banned from having access to the nation’s official foreign exchange window. Soon after, the Bureaux de change (BDCs), known in the local parlance as the black market, came under the CBN’s hammer all geared towards preserving the scarce foreign exchange and making sure that what is available is judiciously deployed.
The CBN also beamed its searchlight on the non-oil sector such as solid minerals and the infusion of funds into the real sector to enhance the country’s production capacity aimed at ensuring that the country imports only essentials that will promote local production. While the apex bank was putting in these efforts, there are areas that are not so sufficiently productive but which are heavily foreign exchange guzzlers. Those segments of the market are so attractive and are making the whole plan to stabilise the foreign exchange application and use look like a child’s play, and almost uncontrollable. A review of the Central Bank of Nigeria’s (CBN) data suggests that Nigeria’s educational sector has suffered massive capital flight in the last 10 years. Specifically, using the CBN’s balance of payment statistics, Nigerians have spent a hefty sum of $28.65 billion on foreign education in the past 10 years (2010 to 2020). This humongous sum is sourced from the official foreign exchange window. To compound the woes of the CBN and by extension the economy of the nation, most of the applications for this money are fake and the proceeds are round-tripped in the black market. It is a highly lucrative business. Also, it is estimated that Nigeria loses about $1.3 billion to medical tourism yearly, which has caused a huge burden on the nation’s economy. As if this is not disappointing enough, the black market is thriving exponentially to the point that it dictates the foreign exchange market. Now, as 2023 election comes closer, politicians are mopping up all the foreign currencies in the market place and warehousing same for campaigns. A bit of that was seen during the parties’ primaries. These are not production processes and they are certainly beyond the control of the CBN even if they are hurting the economy and making the task of financial system stability a lot more arduous. At the risk of being accused of holding brief for the apex bank or, for that matter, playing the advocate role for the institution, it is necessary to point out that the Central Bank of Nigeria has consistently made its case crystal clear that it does not print dollar or any foreign currency for that matter. It has also argued that without an improved productive capacity designed to generate an inflow of foreign exchange through Direct Foreign Investment (DFI), the value of the local currency will continue to be at the mercy of the vagaries in the marketplace. These are incontrovertible facts. Some informed opinion in the public space which I share is of the view that as a way out, the government through the CBN should, as a matter of urgency, stop subsidising health and education bills incurred by the perceived fat cats in the society. I buy the argument that these two parasitic activities in the foreign exchange market should be added to the list of the 43 banned items.
I consider it pertinent also that the CBN should effectively tighten its noose on the BDCs and other speculators creating the challenges the system is facing. There is no gainsaying it that they are constituting an economic nuisance and, invariably, making life difficult for genuine foreign exchange users and by extension the rest of the society. I am convinced that these drastic measures, if adopted and implemented, can conserve foreign exchange and shore up the value of the Naira. All that is required, in my view, is the political will on the part of the government to encourage the CBN to do what it has to do. That is the crux of the matter.
Adegoke is a public affairs analyst
based in Akure, Ondo State