I sympathise with Nigerian football referees. Why? Because they have to use some foreign coins for a toss before the game starts since there are hardly any Nigerian coins in circulation. The coins disappeared a long time ago. Effectively the lowest denomination of our currency today is five naira. I know of nothing that anyone can buy with five naira let alone a sum smaller than five naira.
In 1973, when I went for the NYSC programme, we were paid N120 a month and we were able to live comfortably with that. Today, NYSC folks find it hard to survive on their allowance of about N20, 000. Some of them have had to comb the town to which they are posted to find an additional income for themselves. So what is the value of the naira today? I bet that if you talk to 10 different economists each of them will give you a different answer. That is to show you that no one truly knows the real worth of our currency.
An economist may tell you that the worth of the naira depends on the forces of demand and supply of the reference currency in transaction. But the forces of demand and supply are imperfect and can be manipulated. So truly the value of our currency depends on the health of our economy. That also tells you that economics does not have the quality of exactitude that mathematics has. This also means that the debate on the value of the naira will live long and will not have an answer acceptable to everyone.
However, before the last meeting of the Monetary Policy Committee (MPC) the Governor of the Central Bank of Nigeria, Mr. Godwin Emefiele had indicated that there will be no further devaluation of the naira. The naira which was going for N155 to a dollar in November 2014 was officially devalued in the first quarter of last year by 28 per cent. By the first quarter of last year it was N197 to the dollar. However, in the parallel market a dollar is being sold for N300 and above, thus showing a huge gap between the official rate and Bureau De Change rate.
President Muhammadu Buhari has also confirmed that there will be no more devaluation of the naira. This confirms Emefiele’s stand and that of the Monetary Policy Committee on the matter. But that is not the end of the matter. The country must do some soul searching to find out where we went astray if we want to save the naira from bastardisation.
According to the CBN our import bill was N148.3 billion in 2015. At that time, oil was selling at $50 a barrel. By the first quarter of last year when oil was selling at $33 per barrel, our imports bill had ballooned to N917.6 billion monthly. A forward-looking government would have noticed that trouble was waiting at the corner. It wasn’t long before the price of crude hit rock bottom.
Countries that devalue their currency are those that want to boost their exports by making their products cheaper and more competitive in the global market. Our major export is crude oil – the price of which we do not determine. If we devalue the naira, the country which is largely import-dependent will obviously suffer. The reason is that prices of the products we import will go up astronomically while we receive a meager sum of money from our non-oil exports which are not finished goods and whose prices we do not determine. And the goods we import are food, industrial inputs and petroleum products.
There is hardly anything we can do about industrial inputs especially machinery and spare parts. We will continue to import them until we make a breakthrough in those areas. However, we can do something about food and petroleum products. We can cultivate what we eat and eat what we cultivate. If we are conscientious about it, we can over time export the left over. Even China with a population of 1.4 billion people is a net exporter of food.
As for petroleum products we have no alternative but to continue to import until we have enough refining capacity within the country. I know that President Olusegun Obasanjo issued 18 licences for the building of refineries but as at yesterday none has come on stream. However, it does appear that Alhaji Aliko Dangote has decided to break the jinx by building a high capacity refinery. Mr. Emefiele and his officials decided, out of concern for the high petroleum products import, to go and see for themselves whether our salvation is on the way.
However, for any proprietor of a refinery to stay in business there must be full deregulation of petroleum products. The present subsidy is, over time, not sustainable and it will be more helpful to Nigerians if they can find the products to buy at appropriate prices. Even in Port Harcourt where there are two refineries and a third one at Warri which is a whisper away, petrol is hardly sold at the official rate. It is always higher or the product is declared unavailable.
If other private entrepreneurs decide to follow the Dangote example by setting up new refineries and the Federal Government resurrects the existing refineries we will be self-sufficient in petroleum products and may be able to export the refined products to neigbouring countries.
I am not sure whether our leaders know that we are in a national economic emergency. If the price of our major product – crude oil – has plunged like a crashing comet within a period of 18 months and we can’t pay salaries, can’t fund our imports, it means that the economy is in the emergency room awaiting surgery. There are several ways of dealing with this: cut import spending, reduce the size of government expenditure especially those of the executive and the legislature, tax the rich, pursue the looters and grab the money, stop the junkets on chartered aircraft and high profile parties etc.
Let us run a lean administration in the states and at the centre. I would like to see President Buhari give a State of the Union Address in which he will tell the nation that we need to change our ways, we need to climb down from our high and haughty consumption horse, that the country is at war and we all need to do what we can to bury the bodies, bind the wounds, comfort the bereaved, support the troops, help the displaced because we all ought to be our neighbours’ keepers.
Right now everyone behaves as if everything is normal but nothing is normal. I expect the President to give the country a rousing speech, a kind of all call to arms. When the CBN governor named the 41 items that would not benefit from foreign exchange from the official source I thought that was the time for patriots to rise up and wave the flag and rally round Mr. Emefiele because what he did will give our economy room to breathe. Instead those who want to continue to do round tripping at the expense of the economy rose up in arms. I ask Mr. Emefiele and President Buhari to stand firm on this.
We have been playing games with the economy breeding billionaires who produce nothing but feed fat on the lapses in the economy. Will President Buhari have the political will to tell them to work for their money for a change? If we do not change our lifestyle now, this boat will sink sooner than later. That historic responsibility falls squarely on Buhari’s shoulders, and he is best suited for it because as a person he leads an austere lifestyle. If we don’t change, we will have to crawl back to Shylock the moneylender aka IMF.
In this same country, we have had what the Press dubbed cement armada and another one called rice armada. Both items were imported by irresponsible governments as if the world was coming to an end. The ships choked our ports, some of them were diverted to neighbouring countries, some of them lingered in the high seas for several weeks and there was no leg room for berthing or discharge. From those two episodes, did we learn any lessons? No. We carried on foolishly as if nothing was wrong. Business as usual. The crooks made money; the country nursed its wounds.
The reason we do not have coins in circulation in Nigeria is because our currency is already weak. When our economy was strong in the 1950s and 60s we even had farthings in circulation. So we all had wallets for our coins. Today, wallets are for currency notes and credit and debit cards. In Europe or America they have wallets for credit cards and also for pennies and cents because you can buy something with them. You cannot buy anything with coins in Nigeria today. So, why should we devalue the naira further? If we devalue the naira again we will find ourselves carrying naira in a lorry to the market and returning home with goods on a bicycle.
When you buy something in a supermarket, do they always give you your change? The answer often is: I don’t have change sir. You may think it is their own way of stealing by tricks. Yes, that may be so but in most cases they genuinely don’t have coins or low denomination currency notes because no one uses them. They are almost valueless. So why devalue a currency that is in more ways than one already devalued. Mr. Emefiele, please don’t devalue. Stand firm.