(BACKPAGE) Naira still on slippery slope

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Uba Group

Uba Group

BY OIKONOMIA WITH LEKAN SOTE

Godwin Emefiele, Governor of the Central Bank of Nigeria, is, or was, doing something akin to the irresponsibility of Nero, who was fiddling while Rome was burning. He is, or was, clandestinely pursuing a presidential quest whilst shirking his responsibilities of managing Nigeria’s inflation, interest and foreign exchange rates.

In a suit filed on his behalf by Attorney Mike Ozekhome, Emefiele asked the courts to declare him legally competent to contest the (presidential) primaries of any political party while still serving as the Governor of Central Bank of Nigeria, as long as he gives 30 days resignation notice.

A group (of farmers believed to have benefited from the Anchor Borrowers’ loan schemes that he initiated through the Central Bank of Nigeria) reportedly bought presidential nomination and expression of interest forms for him at N100,000 000 million.

It was also rumoured that he had secretly registered as a member of All Progressives Congress in his ward in Delta State.

If this is true, and some swear it is, it is a brazen challenge to the assumption that certain groups of public servants cannot engage in partisan politics.

And when it (probably) looked like things won’t work out the way (he and his) sponsors envisaged, he relied on Section 84(12) of the Electoral Act to avoid resigning from the exalted position of Governor of Central Bank of Nigeria, arguing that he is a “public servant,” and not a “political appointee.”

If you interrogate this declaration, it will appear that, either way, he should not engage in partisan politics: As a public servant, he shouldn’t join a political party. And as a political appointee, Section 84(12) of the Electoral Act requires him to resign before participating in the primaries of a political party.

When Emefiele became CBN Governor on June 4, 2014, after a strong and not so clandestine lobby by his sponsors, foreign exchange was about N157 to one American dollar. Proof that he lost focus on the job is that, today, the exchange rate is about N415 on the official CBN window, but close to N600 on the parallel market, about 200 per cent depreciation.

Some experts, who foresee further gloom, say “We predict that the currency on the official market will be around N440 per dollar.”

While he performs the macroeconomic policy functions of absentee Minister of Finance, Budget and National Planning, Zainab Ahmed, he neglects his own statutory responsibilities.

When it saw that the Abokifx website collates parallel market exchange rates in Nigeria, his Central Bank of Nigeria accused it of “illegal activity that undermines the economy.” It added that Abokifx was engaging in “illegal foreign trading” without proof.

Minister Ahmed concentrates on the budgeting function of her schedule, for the obvious reason that the government needs money to operate, but almost totally neglects the planning aspect. One is unable to vouch that she performs the finance or fiscal planning aspect of her schedule.

“When Emefiele became CBN Governor on June 4, 2014, after a strong and not so clandestine lobby by his sponsors, foreign exchange was about N157 to one American dollar. Proof that he lost focus on the job is that, today, the exchange rate is about N415 on the official CBN window, but close to N600 on the parallel market, about 200 per cent depreciation”

She doesn’t seem to have a coordinated master plan to prevent the Nigerian economy from almost certain collapse under the watch of Sai Baba. It’s as if she cannot see the danger that is already looming. Or that she simply has no answer.

But you have to acknowledge that she was swift in suspending Ahmed Idris, the Accountant-General of the Federation, who is alleged to have misappropriated a huge sum (N80 billion or so) of Nigeria’s commonwealth. She got that one right.

Anyway, the usually truthful Nigeria Bureau of Statistics recently reported that the Consumer Price Index of Nigeria rose from 15.92 per cent in March 2022 to 16.82 per cent in April 2022. It was as high as 17.10 per cent in August 2021, before the International Monetary Fund projected that the CPI would drop to 16.10 per cent in 2022.

IMF’S World Economic Outlook predicted that “Higher food prices will hit consumers’ purchasing power, particularly among low-income households… (And that) rising food prices are the underlying factors behind the surge of headline inflation in Nigeria.”

“CBN"

Then it hits home to the foreign exchange crux of the matter: “Food prices have increased due to import restrictions and a nonflexible exchange rate management. The current (foreign exchange) regime is keeping the official exchange rate artificially strong, while the Naira has weakened significantly on the parallel market.”

If it’s any comfort for any Nigerian who may be happy to know that the inflation crisis is not a problem of Nigeria only, there are reports that Britons are skipping meals or eating smaller rations as food is becoming more expensive due to high inflation rate.

Even Jeff Bezos, the second richest man in the world, and Joe Biden, America’s President who is also the most powerful man in the world, can’t agree if a hike in taxation will raise inflation. Some argue that money taken in by the government in the form of taxation is not available for free spending which can lead to inflation.

To compound the situation and further pressure Nigeria’s inflation rate, which is tied to the foreign exchange rate regime, “The Central Bank (of Nigeria) has restricted importers’ access to foreign currency for (the importation of) 45 products, and has reduced the supply to other importers.”

These two steps – denial and restriction of foreign exchange – will ultimately lead to unavailability, nay scarcity, of goods that are not produced locally. Classic economics theory says when supply is low, relative to demand, the price rises.

Also, they push the prices of goods that eventually get imported, legally or smuggled, because they would have been paid for with expensive American dollars, the major currency of international trade.

Aren’t you shocked that the Central Bank of Nigeria, which is behaving like the ostrich that buries its head in the sand, claims that it does not recognise the parallel market exchange rate, whereas the principle of conservatism of the accounting profession recommends its use for costing purposes?

If you believe the economic experts who argue that inflation erodes wealth, you will agree that a weak currency is the easiest indicator of poverty. When your currency cannot buy as much as it used to buy, you are on your way to the poorhouse.

So, the failure of the Central Bank of Nigeria to control inflation is the major cause of poverty in Nigeria. It’s as simple as that, though it may sound somewhat simplistic or reductionist. But that is the reality.

Signs that the Naira is weak are that some transactions, frivolous as “spraying” of musicians at social engagements, or serious transactions, like payment for rental apartments in highbrow neighbourhoods of Lagos, are carried out with the American dollar these days.

Even politicians have been reported to have bought over delegates at political party primaries with American dollars. The gubernatorial candidate of the Peoples Democratic Party in Osun State, Ademola Adeleke, in a video that had gone viral was boasting that he had come with hard currency to run his political campaign.

In acknowledgement of the declining purchasing power, and the high cost of printing Naira notes, the Central Bank of Nigeria recently announced that the N5, N10 and N20 notes, or even the entire Naira notes, are going to be phased out, and replaced with e-Naira.

You already know that the 1k, 5k, 10k coins and the N1 note have practically disappeared, having become worthless. There are hardly any commodities exchanged for those denominations anymore.